The number of Americans who signed contracts to buy homes dropped sharply in September, reflecting higher mortgage rates and home prices that have made purchases more costly.
The National Association of Realtors says its seasonally adjusted pending home sales index fell 5.6 percent to 101.6, the lowest level in nine months. The decline pushed the index below its year-ago level, the first time that's happened in nearly 2 1/2 years.
There is generally a one- to two-month lag between a signed contract and a completed sale. The drop suggests final sales will decline in the coming months.
Mortgage rates reached a two-year high in August and remained elevated in September. But they have fallen in the past month, which could help boost contract signings in October.
Many economists say the housing recovery should continue, albeit with slower gains in home sales. They note that home prices and mortgage rates remain low by historical standards.
Monday's report "is in line with other housing indicators ... that suggest the pace of improvement in housing markets has slowed," Cooper Howes, an economist at Barclays Capital, said in a note to clients.
Click here to see the market reaction.