The numbers: Contract signings on U.S. homes fell sharply in August, as the housing market was hammered by high rates and a scarcity of home listings.

Pending home sales fell by 7.1% in August from the previous month, according to the monthly index released Thursday by the National Association of Realtors (NAR).

Pending home sales in August were at their lowest level since April 2020, at the height of the the coronavirus pandemic. Those two months were tied for the lowest level since the NAR began tracking the data in 2001.

The figure was sharper than what Wall Street expected. Economists were expecting pending home sales to fall 1% in August.

Transactions were down 18.7% from last year.

Pending home sales reflect transactions where the contract has been signed for the sale of an existing home, but the sale has not yet closed. Economists view it as an indication of the direction of existing-home sales in subsequent months.

Big picture: Rates well into the 7% range in August, which may have slowed down buyer demand.

Resale homes have felt the brunt of high rates more so than home builders, who are able to offer lower rates on newly built homes.

But as rates head to new highs—at the end of September, rates went up to the highest level since December 2000—the overall housing market may likely feel even more pain before things turn around.

What the realtors said: “It’s clear that increased housing inventory and better interest rates are essential to revive the housing market,” NAR Chief Economist Lawrence Yun said.

“The Federal Reserve must consider the sharply decelerating rent growth in its consideration of future monetary policy. There is no need to raise interest rates,” he added.

Yun also flagged that the government shutdown could disrupt home sales in the short run “due to the lack of flood insurance or delays in government-backed mortgage issuance.”

What they’re saying: “August may be the beginning of the end of this resilient housing market—at least for a while,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement.

“Buyers are hitting affordability ceilings, causing some of them to sit out the market. For others, the higher mortgage rates and general economic uncertainty are simply making them more cautious,” she added. “Either way, expect the number of home sales transactions this fall to be at a decade low.”

Market reaction: Stocks were up in early trading on Thursday. The yield on the 10-year Treasury note rose above 4.6%.

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