Home purchase contracts plunged 7.3% in September, reaching their lowest level since 2001 as mortgage rates climbed above 7%, forcing prospective buyers to delay purchases despite increasing inventory and widespread price reductions.
By yourNEWS Media Newsroom
The U.S. housing market recorded its weakest level of pending home sales in 25 years during September, as rapidly rising mortgage rates drove buyers out of the market despite a growing number of available properties and increased willingness among sellers to negotiate.
The National Association of Realtors reported Tuesday, Oct. 20, that its Pending Home Sales Index dropped 7.3% from August to 66.0, the lowest reading since the organization began tracking the measure in 2001. Contract activity was also 11.3% below September 2025, with declines recorded across every major U.S. region.
The figures indicate that the housing market is entering the final months of 2026 under substantial pressure from borrowing costs that have risen much faster than household incomes. Although buyers have more properties to choose from and increasing opportunities to negotiate prices, higher monthly mortgage payments continue to prevent many households from purchasing homes.
The Pending Home Sales Index measures signed contracts for existing single-family homes, condominiums and cooperative apartments before transactions are completed. The index uses 100 as its baseline, representing average contract activity in 2001.
September’s reading of 66 indicates that contract activity was approximately 34% below that benchmark.
Because most signed purchase contracts result in completed sales within one or two months, the index is considered an early indicator of existing-home sales activity. September’s decline therefore raises the possibility of weaker completed sales during October and November.
National Association of Realtors Chief Economist Lawrence Yun attributed the deterioration primarily to the rapid increase in mortgage rates.
“Market conditions weakened in September due to fast-rising mortgage rates,” Yun said. “Although job growth and income gains can support home purchases, housing affordability is more affected by changes in mortgage rates.”
The decline was especially pronounced in the western United States, where housing affordability has remained a significant challenge in many metropolitan areas.
Pending sales in the West fell 9.2% from August and 15% compared with September 2025, making it the weakest-performing region on both a monthly and annual basis.
The South recorded an 8.2% monthly decrease and a 12% annual decline, while the Midwest experienced decreases of 6.5% and 8.7%, respectively.
The Northeast posted the smallest monthly decline at 4.2%, although pending sales remained 9.4% below their level a year earlier.
The widespread decreases show that reduced housing demand is not limited to traditionally expensive coastal markets. Regions that have historically offered more affordable housing are also experiencing weaker purchasing activity as financing costs increase.
The primary source of pressure is the rising cost of mortgage borrowing.
According to Freddie Mac’s weekly mortgage rate data, the average interest rate on a 30-year fixed mortgage increased from 6.71% on Sept. 3 to 7.03% by Sept. 24.
The rate continued rising into October, reaching 7.28% on Oct. 1 and 7.40% by Oct. 8. It remained at 7.40% on Oct. 15, its highest level in nearly three years.
The increase has significantly affected monthly payments for prospective homeowners, particularly buyers who must finance a substantial portion of their purchase price.
For a household borrowing $350,000 over 30 years, a mortgage rate of 6.71% produces a monthly principal and interest payment of approximately $2,260.
At 7.40%, that payment increases to approximately $2,423, adding roughly $163 per month, or nearly $2,000 annually, without accounting for property taxes, homeowners insurance or other ownership expenses.
The additional cost can reduce the maximum mortgage amount for which a buyer qualifies, forcing some households to consider less expensive properties or postpone purchasing.
First-time buyers are particularly vulnerable because they generally lack proceeds from the sale of an existing home to use toward a larger down payment.
Households attempting to move from one property to another face additional financial considerations.
Many existing homeowners obtained mortgages when rates were substantially lower and may be reluctant to sell if purchasing another property would require replacing that financing with a more expensive loan.
That reluctance can keep some properties off the market, although the latest data show that overall inventory has increased despite weaker demand.
Yun suggested that mortgage rates may be approaching their peak after climbing substantially relative to increases in the Federal Reserve’s short-term interest rate.
“Given that mortgage rates have already risen much more than the Federal Reserve’s short-term interest rate hikes, mortgage rates could be topping out,” Yun said. “However, increasing energy prices and the resulting inflationary pressure are highly uncertain.”
Mortgage rates are influenced by several economic factors, including long-term Treasury yields, inflation expectations, lending conditions and anticipated Federal Reserve policy.
They do not necessarily move in direct proportion to changes in the central bank’s benchmark short-term interest rate.
Recent increases in energy prices have complicated the outlook because persistently elevated fuel costs can contribute to inflation and influence investor expectations about future interest rates.
The housing slowdown is also evident in data collected by real estate brokerage Redfin.
In an Oct. 12 report examining September homebuying activity, Redfin found that pending home sales declined 4% from August on a seasonally adjusted basis.
That represented the steepest monthly decrease in more than three years.
Redfin’s figures showed that pending transactions fell to their lowest level since spring 2014, excluding April 2020, when the onset of the COVID-19 pandemic caused an extraordinary disruption in housing activity.
The brokerage uses different data sources and methodology from the National Association of Realtors, which helps explain why the two organizations reported different monthly declines.
Nevertheless, both reports identified higher mortgage rates as a major factor behind reduced demand.
Chen Zhao, Redfin’s head of economic research, said the affordability consequences of rates exceeding 7% were discouraging buyers from entering the market.
“It’s not surprising that when rates climb above 7 percent, fewer people buy homes because fewer people can afford them,” Zhao said.
The decline in demand is occurring at a time when housing inventory has expanded, creating more opportunities for buyers who remain financially qualified.
Redfin reported that the total supply of homes available for sale increased 1.2% from August, reaching its highest level since March 2020.
The increase reflects a combination of new properties entering the market and existing listings remaining available longer because of reduced buyer activity.
New listings increased modestly by 0.3% from August, suggesting that homeowners continued placing properties on the market even as buyers became more cautious.
The growing supply has also contributed to more frequent price reductions.
According to Redfin’s September housing market analysis, approximately 19.8% of sellers with active listings reduced their asking prices during the month.
The proportion of sellers cutting prices increased in 43 of the nation’s 50 largest metropolitan areas.
The brokerage also found that 60.5% of homes sold in September closed below their original listing prices, continuing an 18-month period in which approximately three out of five completed transactions involved some discount from the initial asking price.
Those figures suggest that buyers who can afford current mortgage payments may have greater negotiating leverage than they did during periods of stronger demand and limited inventory.
However, a home selling below its original asking price does not necessarily mean that its value has declined compared with the previous year.
Some sellers initially list properties above prevailing market values and subsequently reduce their expectations to attract offers.
National home prices have continued rising modestly, although the pace of appreciation has slowed considerably.
Redfin reported that the median U.S. home sale price increased 1.3% from September 2025 to approximately $393,895, the smallest annual increase since February.
The median asking price declined 0.5% from August, while its annual increase slowed to 0.6%, the weakest year-over-year growth since April.
These developments indicate that the housing market is adjusting through slower price growth, longer selling periods and more concessions rather than a broad national decline in property values.
Buyer behavior is also changing.
Redfin found that 14.5% of home purchase agreements fell through in September, the highest proportion recorded in the company’s data.
Canceled transactions can occur for several reasons, including financing difficulties, inspection findings, appraisal concerns and buyers reconsidering purchases before closing.
With more properties available, some buyers may also feel less pressure to proceed with transactions that become financially unfavorable or reveal unexpected problems.
The increase in canceled agreements adds another source of uncertainty for sellers, who may need to relist properties and negotiate with additional prospective purchasers.
Separate figures from the National Association of Realtors’ existing-home sales report show that the inventory of unsold existing homes reached 1.60 million units at the end of September.
That represented a 1.9% increase from August and a 4.6% increase from September 2025.
At the prevailing sales pace, available inventory represented a 4.8-month supply, unchanged from August but higher than the 4.5-month supply recorded a year earlier.
Months of supply measures how long the current inventory would last if homes continued selling at the existing pace and no additional properties entered the market.
An increase can reflect more homes becoming available, weaker sales activity or a combination of both.
September’s figures suggest that slower purchasing activity is contributing to the rising supply.
The growing inventory has not been sufficient to overcome the affordability effects of higher mortgage rates.
For many prospective buyers, even substantial reductions in asking prices may provide less financial relief than a meaningful decline in borrowing costs.
That relationship creates difficult decisions for buyers and sellers alike.
Buyers must determine whether to purchase at current rates, continue renting or postpone their plans in hopes that mortgage costs decline.
Sellers must decide whether to accept lower offers, reduce asking prices or remove properties from the market until conditions improve.
Yun said the limited number of distressed property sales is helping prevent more significant price declines.
“Despite the difficulty of obtaining a mortgage, the limited number of distressed properties is ensuring steady home prices,” he said.
“Buyers and sellers may simply be holding back until mortgage rates move favorably.”
Distressed transactions, including foreclosures and certain short sales, can exert downward pressure on prices when owners must sell quickly because of financial difficulties.
The absence of widespread distressed selling means many homeowners can delay transactions rather than accept substantial price reductions.
That differs from housing downturns driven by large numbers of foreclosures, when forced sales can accelerate declines in property values.
The combination of relatively stable prices and elevated borrowing costs has left affordability under pressure even as sellers make concessions.
For the broader economy, reduced homebuying activity can also affect businesses connected to real estate transactions.
Mortgage lenders, title companies, real estate brokerages, home inspectors, moving companies and home improvement retailers can experience reduced demand when fewer properties change hands.
Housing-related spending often accompanies home purchases, including expenditures on furniture, appliances, remodeling and household equipment.
A sustained decline in transactions can therefore affect economic activity beyond residential real estate itself.
The latest pending-sales figures add to concerns about the strength of the housing market during the final quarter of 2026.
The National Association of Realtors’ index has reached a record low, while Redfin’s separate measurements show the fewest pending transactions in more than a decade outside the initial pandemic disruption.
Both reports indicate that buyers are becoming more cautious despite increased inventory and more opportunities to negotiate.
At the same time, higher mortgage rates remain a substantial obstacle to purchasing a home, particularly for households that do not already own property.
The direction of borrowing costs will likely remain an important factor in determining whether demand improves during the coming months.
If mortgage rates decline, some prospective buyers who have postponed purchases may return to the market, potentially increasing competition for available properties.
If rates remain elevated or climb further, contract activity could continue weakening even as sellers adjust prices.
The latest figures show that affordability, rather than a lack of available homes alone, has become a principal constraint on the U.S. housing market.
With the Pending Home Sales Index at its lowest level since tracking began in 2001, the September report indicates that the recovery in residential transactions remains dependent on more favorable financing conditions and improved purchasing power for American households.
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