Pending Home Sales Fall in September as High Mortgage Rates Persist

U.S. pending home sales fell sharply in September as mortgage rates climbed above 7 percent, pushing more prospective buyers to the sidelines and sending homebuying activity close to its lowest level in more than a decade.

Pending sales, which include contracts that have been signed but have not yet closed, fell by 4 percent from August on a seasonally adjusted basis, according to a report published on Oct. 12 by Redfin. This marks the largest monthly decline in more than three years.

The number of homes going under contract fell to its lowest level since spring 2014, excluding April 2020, when the onset of the COVID-19 pandemic temporarily froze much of the housing market.

The slowdown was widespread. Pending sales fell from a year earlier in all 50 of the most populous U.S. metropolitan areas for the first time since September 2023.

Some of the largest declines were concentrated on the West Coast. Pending sales dropped by 24.4 percent in Seattle, 16 percent in Los Angeles, 15.8 percent in San Diego, and 15.5 percent in Anaheim, California, according to Redfin.

The pullback came as borrowing costs rose throughout September. The average rate on a 30-year fixed mortgage reached 7.28 percent by the end of the month, the highest level since November 2023.

“It’s not surprising that when rates climb above 7 percent, fewer people buy homes because fewer people can afford them,” said Redfin head of economic research Chen Zhao.

The weakening market is giving more leverage to buyers who stay in the market.

“For buyers, less competition means more room to negotiate: on price, on closing costs, on repairs, and sometimes sellers even pay for a mortgage-rate buydown,” Zhao said. “Slow sales also mean prices may flatten or fall in the not-so-distant future.”

Buyers are also increasingly walking away from deals. According to Redfin, some 14.5 percent of home-purchase agreements made in September were canceled, the highest share in its records outside the first two months of the COVID-19 pandemic.

A separate report from Zillow showed a similar weakening in buyer demand.

In its Oct. 6 report, Zillow said newly pending home sales fell by 8.5 percent from a year earlier in September, while its preliminary estimate showed completed existing-home sales declining by 2.5 percent year over year.

The affordability pressure came even as home-price growth remained relatively modest.

Zillow found that U.S. home values were just 1 percent higher than a year earlier. Even so, the estimated monthly mortgage payment on a typical home was 6.7 percent higher because of rising interest rates, assuming a 20 percent down payment and excluding taxes and insurance.

“We expect sales to remain lower than last year through the fourth quarter. However, it’s not out of the question that rates will decline as rapidly as they rose, which would bring both buyers and sellers back to the market,” said Mischa Fisher, chief economist at Zillow.

There are signs that home-price growth is losing momentum. The median U.S. sale price rose by 1.3 percent from a year earlier to $393,895 in September, the smallest annual increase since February, according to Redfin.

At the same time, nearly 20 percent of sellers with active listings cut their asking prices during the month, while 60.5 percent of homes that sold closed for less than their original asking price.