Pending Home Sales Hit a Record Low as Mortgage Rates Climb

The U.S. housing market lost momentum in September as rising mortgage rates pushed more buyers to the sidelines. Pending home sales fell to their lowest level since the National Association of Realtors began tracking the index in 2001, signaling a difficult fall for the housing market.

The National Association of Realtors reported that pending home sales dropped 7.3% from August and 11.3% from a year earlier. The decline was widespread, with all four U.S. regions recording fewer signed contracts. The results also fell well below economists’ expectations. 

Higher Rates Keep Buyers on the Sidelines

Mortgage rates climbed above 7% in October, increasing monthly payments and reducing how much buyers can afford. Freddie Mac reported that the average 30-year fixed mortgage rate reached 7.4% for the week ending October 15, its highest level in nearly three years.

The impact is significant for households already dealing with elevated home prices and other living expenses. Even buyers who qualify for a mortgage may decide to postpone their purchase rather than commit to a payment that stretches their budget.

Lawrence Yun, NAR’s chief economist, attributed September’s decline to rapidly rising mortgage rates. He also noted that limited numbers of distressed properties are helping keep home prices relatively steady, even as demand weakens.

A Slower Market Could Create Opportunities

The slowdown is not necessarily bad news for every buyer. More sellers are reducing asking prices, and growing inventory in some markets is giving buyers greater room to negotiate. However, those advantages may be offset by higher borrowing costs, which can significantly increase the long-term cost of a home.

The regional figures also show that conditions vary. The West recorded the steepest monthly decline in pending sales at 9.2%, while the Northeast saw a smaller decrease of 4.2%. Nevertheless, every region posted declines compared with the previous year. 

What Comes Next?

Pending sales typically become completed transactions within one or two months, making the index an early indicator of future existing-home sales. September’s decline suggests that sales activity could remain weak heading into late fall.

Much will depend on mortgage rates, inflation, and household purchasing power. If borrowing costs remain elevated, more buyers may delay their plans. Sellers may then need to adjust prices or offer concessions to attract serious interest.