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Contracts to buy U.S. previously owned homes fell less than expected in July as mortgage rates eased a bit, pulling some buyers back into the housing market.

The National Association of Realtors (NAR) said on Wednesday its Pending Home Sales Index, based on signed contracts, dropped 1.0 per cent to 89.8 last month, the lowest level since April 2020. Contracts have declined in eight of the last nine months.

In July, contracts fell in the Northeast, South and Midwest, but rose in the West.

Economists polled by Reuters had forecast contracts, which become sales after a month or two, would drop 4.0 per cent. Pending home sales tumbled 19.9 per cent in July on a year-on-year basis.

The 30-year fixed-rate mortgage retreated from 5.78 per cent in mid-June to 5.30 per cent at the end of July, according to data from mortgage finance agency Freddie Mac. The rate at the start of the year was 3.22 per cent.

“In terms of the current housing cycle, we may be at or close to the bottom in contract signings,” said Lawrence Yun, the NAR’s chief economist. “Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”

The housing market is the main area of the economy where the Federal Reserve’s aggressive monetary policy tightening campaign to slow demand in order to tame inflation is achieving some results. Data on Tuesday showed new home sales plunged to a 6-1/2-year low in July.

Home resales and single-family housing starts are at two-year lows. The National Association of Home Builders/Wells Fargo Housing Market sentiment index fell below the break-even level of 50 in August for the first time since May 2020, other reports showed last week.

But with house prices remaining elevated amid a critical shortage of affordable homes, a housing market collapse is unlikely.

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