U.S. home buyers signed fewer contracts to buy existing homes in August, as higher mortgage rates and higher home prices weighed on housing affordability. So-called pending home sales fell 1.6 percent month-to-month, according to the National Association of Realtors, but are still 5.8 percent higher from a year ago.
The Realtors warned earlier this month that the increase in closed home sales in August (signed contracts in June or July) was the "last hurrah" as agents were reporting a steep drop in buyer traffic in August. These pending contracts generally take one to two months to close and therefore indicate slower final sales for the fall.
"Sharply rising mortgage interest rates in the spring motivated buyers to make purchase decisions, culminating in a six-and-a-half-year peak for sales that were finalized last month," said Lawrence Yun, chief economist for the Realtors. "Moving forward, we expect lower levels of existing-home sales, but tight inventory in many markets will continue to push up home prices in the months ahead."
Home prices were up over 12 percent in the nation's top twenty housing markets in July, according to a report this week from S&P/Case-Shiller. While the price gains are moderating, the jumps make it increasingly difficult for first-time home buyers to get into the housing market.
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Another report on sales of newly built homes in August showed an increase from July, but the pace is still the second lowest of the year. The markets for both new and existing homes have been constrained by very low inventory and still tight credit. Neither are expected to ease in the near future.
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The Northeast was the only region to see an increase in pending home sales, up 4.0 percent month-to month. Sales declined 1.4 percent in the Midwest, fell 3.5 percent in the South and fell 1.6 percent in the West. The Realtors are predicting total existing home sales to be up about 11 percent I n2013 to 5.2 million homes sold but expect little change from that pace in 2014.
—By CNBC's Diana Olick. Follow her on Twitter @Diana_Olick.