Despite slowing in August, pending home sales are still running at the second-highest level in the past 12 months, according to the National Association of Realtors.

Declines were evident in every region except for the West, which saw its fourth consecutive quarter of gains.

NAR’s pending homes sales index is a based on contract signings.

The index dropped 1% to 104.7 in August from 105.8 in July, and is now 2.2% below the reading in August 2013.

The index is above 100 – considered an average level of contract activity – for the fourth consecutive month and is at the second-highest level since last August.

Lawrence Yun, NAR chief economist, says contract signings are holding steady and fewer distressed sales and less investor activity are driving the decline.

“Fewer distressed homes at bargain prices and the acknowledgement we’re entering a rising interest rate environment likely caused hesitation among investors last month,” he said. “With investors pulling back, the market is shifting more towards traditional and first-time buyers who rely on mortgages to purchase a home.”

Overall, Yun forecasts existing-homes sales to be down 3% this year to 4.94 million, compared to 5.09 million sales of existing homes in 2013. The national median existing-home price is projected to grow between 5-6% this year and 4-5% next year.

According to NAR, 81% percent of first-time buyers in 2013 who financed their purchase obtained a conventional or FHA loan.

Overall, first-time homebuyers have been less prevalent from the housing recovery, representing less than a third of all buyers each month for the past two years.

Yun says first-time buyer participation should gradually improve despite tight credit conditions and the inevitable rise in rates.

“The employment outlook for young adults is brightening and their incomes3 finally appear to be rising,” he said. “Jobs and income gains will help repay student debt and better position first-time buyers, setting the stage for improved sales growth in upcoming years.” 

The index in the West rose for the fourth consecutive month, up 2.6% in August to 102.1, but still remains 2.6% below August 2013.

The Northeast saw the index slide 3% to 86.5 in August, but is still 1.6% above a year ago. In the Midwest the index fell 2.1% to 102.4 in August, and is 7.6% below August 2013. 

Pending home sales in the South decreased 1.4% to an index of 117.0 in August, unchanged from a year ago. Existing-home sales are expected to be stronger in the second half of the year behind improved inventory conditions, continuously low interest rates and slower price growth.