US Pending Home Sales Hit Record Low in September

Contracts to purchase previously owned homes in the United States fell to a record low in September, according to data released Tuesday. The decline reflects the impact of rising mortgage rates on housing demand.

Pending Sales and Mortgage Rates

The pending home sales index dropped 7.3% from August to 66.0, the lowest level since the series began in 2001, according to the National Association of Realtors (NAR). This figure missed economists' forecasts, which had predicted a 0.5% slip. Year-over-year, pending home sales were down 11.3%.

Lawrence Yun, NAR’s chief economist, stated, "Market conditions weakened in September due to fast-rising mortgage rates." In a separate release, Yun noted, "Although job growth and income gains can support home purchases, housing affordability is more affected by changes in mortgage rates."

Mortgage rates accelerated during the month. According to Mortgage News Daily, the average rate on the 30-year fixed mortgage started September around 6.8% and reached 7.6% by the end of the month. Data from mortgage finance firm Freddie Mac showed the 30-year fixed rate averaged 7.40% last week, the highest level in nearly three years. Reuters reported that these higher borrowing costs are tracking Treasury yields as the US-Israeli war with Iran fans inflation.

Regional and Construction Trends

Pending sales declined across all four regions of the country. The National Association of Realtors reported the largest month-to-month drops in the South (-8.2%) and the West (-9.2%). The South is typically the most active market, while the West is the most expensive.

Home construction activity also slowed. According to the U.S. Census, housing starts fell 4.56% to 859,000 annualized, the lowest level since September 2025. Building permits, an indicator of future construction, decreased by 4% for the month.

Ben Ayers, senior economist at Nationwide Financial, said in a note to investors, "We expect home construction activity to remain moribund into 2027." He added, "Many builders are still trying to unload current projects with widespread use of price cuts and incentives cutting into profit margins. Housing starts, especially for single-family homes, could be low for much of the next year as the market adjusts to a higher rate environment – adding a modest drag to economic growth from reduced residential construction."

Builder Sentiment

Homebuilder sentiment reached a 14-year low in October, according to the National Association of Home Builders (NAHB). The index components for current sales, future sales expectations, and buyer traffic all fell, with buyer traffic hitting its lowest level.

Robert Dietz, NAHB’s chief economist, said in a release, "Housing remains squeezed by supply-side constraints and significant affordability challenges." He continued, "Demand persists, but higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines."

Why it matters

The record low in pending home sales signals a significant cooling in the housing market driven by higher borrowing costs. With mortgage rates tracking Treasury yields amid inflationary pressures from the US-Israeli war with Iran, the decline in both sales and construction activity suggests a prolonged adjustment period. Economists warn that reduced residential construction could act as a modest drag on broader economic growth in the coming year.

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Sources

• cnbc.com: September data shows housing market in a deep freeze
• finance.yahoo.com: US pending home sales tumble to record low in September

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.