U.S. pending home sales slowed in August, with tight inventory conditions, higher interest rates, rising home prices and continuing restrictive mortgage credit impacting the market, according to the National Association of Realtors (NAR).

The Pending Home Sales Index, a forward-looking indicator based on contract signings, dropped 1.6 percent to 107.7 in August from a downwardly revised 109.4 in July. The index is 5.8 percent above August 2012 when it was 101.8. Pending sales have been above year-ago levels for the past 28 months.

Lawrence Yun, NAR chief economist, said the decline was expected following elevated levels of closed existing-home sales at the end of summer.

"Sharply rising mortgage interest rates in the spring [motivated] buyers to make purchase decisions, culminating in a six-and-a-half-year peak for sales that were finalized last month," Yun said in a statement. "Moving forward, we expect lower levels of existing-home sales, but tight inventory in many markets will continue to push up home prices in the months ahead."

NAR predicts that total existing-home sales this year will be up about 11 percent to nearly 5.2 million, but the group foresees little change is seen in 2014, with sales forecast to increase less than 1 percent. NAR also projects that national median existing-home price will rise 11 to 12 percent for all of 2013, easing to an increase of 5 to 6 percent next year, with general improvement expected in inventory supplies.