The 8.1 percent increase in pending home sales in August, the first gain in three months, didn't start a trend. The National Association of Realtors® (NAR) said its Pending Home Sales Index (PHSI) for September slipped 2.3 percent in September to 116.7, and is now down 8.0 percent year-over-year.

The PHSI is based on new purchase contracts for existing homes, including single-family dwellings, townhomes, condominiums, and cooperative apartments.

"Contract transactions slowed a bit in September and are showing signs of a calmer home price trend, as the market is running comfortably ahead of pre-pandemic activity," said Lawrence Yun, NAR's chief economist. "It's worth noting that there will be less inventory until the end of the year compared to the summer months, which happens nearly every year.

He added. "Some potential buyers have momentarily paused their home search with intentions to resume in 2022."

Forecasts for the PHSI were mixed but did not anticipate a decline. Analysts polled by Econoday expected pending sales to rise 1.7 percent. The Trading Economics consensus predicted no change from August.

Although housing supply remains low, Yun says he expects inventory to turn the corner in 2022. "Rents have been mounting solidly of late, with falling rental vacancy rates," Yun said. "This could lead to more renters seeking homeownership in order to avoid the rising inflation, so an increase in inventory will be welcomed."

Pending sales fell during the month in all four major regions and none overcame the year-over-year deficit. The PHSI in the Northeast fell 3.2 percent to 93.1 in September, an 18.5 percent decline from a year ago. In the Midwest, the index dropped 3.5 percent to 111.4 down 5.8 percent compared to September 2020.

Pending home sales transactions in the South decreased 1.8 percent to an index of 139.1, which was 5.8 percent lower on an annual basis. Contract signings in the West dipped 1.4 percent. The September 2021 reading of 105.3 was 7.2 percent lower than the prior September.

Once all home sale data for the year is tabulated, NAR expects home sales to have risen by 6.4 percent in 2021; and due to higher anticipated mortgage rates, the Association projects sales to then decline by 1.7 percent in 2022. Yun says home prices will moderate with only 2.8 percent growth in 2022 after a double-digit price gain of 14.7 percent in 2021.

The PHSI 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. Existing home sales numbers for October will be released on November 22.Although housing supply remains low, Yun says he expects inventory to turn the corner in 2022. "Rents have been mounting solidly of late, with falling rental vacancy rates," Yun said. "This could lead to more renters seeking homeownership in order to avoid the rising inflation, so an increase in inventory will be welcomed."