Pending home sales plunged in August as 2-decade high mortgage rates continue to squeeze both buyers and sellers

• Pending home sales slipped 7.1% in August in another sign of the housing market's slump.
• Multi-decades high mortgage rates are keeping homebuyers out of the market.

Pending home sales slipped 7.1% in August compared to July, according to the National Association of Realtors.

The decline comes as mortgage rates push well above 7% this quarter, keeping borrowing costs high for buyers and discouraging sellers from listing their homes as they cling to lower rates they locked in years ago.

"Mortgage rates have been rising above 7% since August, which has diminished the pool of home buyers," said Lawrence Yun, NAR chief economist, in the release. "Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets."

This week, Redfin CEO Glenn Kelman also said the housing market has hit "rock bottom" and will likely stay there for a while.

Measured using the Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, pending transactions fell by 18.7% compared to the same time last year. Home sales dipped from August across all regions of the country, falling the most in the South, where pending sales recorded a drop of 9%.

While the construction of new homes has been on the rise, prices still haven't budged enough to bring priced out hombuyers off of the sidelines. The total value of the market has surged to almost $52 trillion this year.

NAR's Yun also warned that a government shutdown will disrupt some home sales in the short run due to the lack of flood insurance or delays in government-backed mortgage issuance.