Washington, DC CNN  — 

Mortgage rates surging over 7% in August to levels not seen in 20 years packed a punch last month, with US pending home sales dropping 7.1% in August from the month before.

Pending sales had been on the rise just one month prior, despite elevated prices and higher mortgage rates, according to a report released Thursday by the National Association of Realtors. But rates topping 7% in August snapped that streak.

A new home is built at a housing development in Fairfax, Virginia, on August 22, 2023. Sales of homes in the United States ticked down in July, according to industry data released on August 22, 2023, as elevated mortgage rates and limited housing supply held buyers back. The housing market in the world's biggest economy has been reeling as interest rates climbed, making home owners reluctant to put their properties up for sale -- having earlier locked in lower rates on their mortgages. (Photo by Andrew Caballero-Reynolds / AFP) (Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)

The pending sales index, a forward-looking indicator based on signed contracts to buy a home rather than the final sales that are accounted for in existing home sales, fell far short of analysts’ expectations for a drop in sales of less than 1%.

All four US regions posted monthly losses and year-over-year declines in transactions.

Pending transactions were down 18.7% from August 2022, when average weekly mortgage rates ranged between 4.99% and 5.5%.

“Some would-be homebuyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets,” said Lawrence Yun, NAR’s chief economist. “It’s clear that increased housing inventory and better interest rates are essential to revive the housing market.”

This is a developing story and will be updated.