Rising rates may have also caused a surge in home buying, as those on the fence suddenly felt pressured to buy. Now, with rates already up, those factors have expired.

"We saw an increasing number of comments suggesting the sharp rise in mortgage rates has led to a pause in demand, with many agents saying the initial urgency they saw from buyers as rates moved higher has subsided and now buyers are stepping back to re-evaluate their options," said analysts at Credit Suisse (CS) in their monthly survey of real estate agents.

The analysts noted a drop in buyer traffic in July, the first time since last December that it didn't exceed expectations.