Pending home sales retreated in August but remained at a healthy level of activity and have now risen year-over-year for 12 consecutive months, according to the National Association of Realtors^®. A modest increase in the West was offset by declines in all other regions.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 1.4 percent to 109.4 in August from 110.9 in July but is still 6.1 percent above August 2014 (103.1).

Lawrence Yun, NAR chief economist, says even with the modest decline in contract signings, demand continues to outpace housing supply and elevate price growth in numerous markets. "Pending sales have leveled off since mid-summer, with buyers being bounded by rising prices and few available and affordable properties within their budget," he said. "Even with existing-housing supply barely budging all summer and no relief coming from new construction, contract activity is still higher than earlier this year and a year ago."

According to Yun, sales in the coming months should be able to roughly maintain their current pace. However, he warns that there are looming speed bumps that have the potential to impact housing.

"The possibility of a government shutdown and any ongoing instability in the equity markets could cause some households to put off buying for the time being," adds Yun. "Furthermore, adapting to the changes being implemented next month in the mortgage closing process could delay some sales."

The national median existing-home price is expected to increase 5.8 percent in 2015 to $220,300. Yun forecasts total existing-home sales this year to increase 7.0 percent to around 5.28 million, about 25 percent below the prior peak set in 2005 (7.08 million).

The PHSI in the Northeast fell 5.6 percent to 93.3 in August, but is still 8.9 percent above a year ago. In the Midwest the index inched down 0.4 percent to 107.4 in August, and is now 6.5 percent above August 2014. 

Pending home sales in the South declined 2.2 percent to an index of 121.5 in August but are still 4.1 percent above last August. The index in the West rose 1.8 percent in August to 104.9, and is now 7.6 percent above a year ago.

The National Association of Realtors^®, "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

^*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.