Pending home sales fell 7.3% in September from August and dropped 11.3% year-over-year, according to National Association of Realtors data released today. The decline coincided with a sharp jump in mortgage rates. The average 30-year fixed rate rose from around 6.8% at the start of September to 7.6% by month end, according to Mortgage News Daily.
Regional weakness was uneven. Sales dropped across the nation, but the South fell 8.2% month-over-month and the West fell 9.2%. The South is typically the most active regional market. The West has the highest prices.
Home construction deteriorated faster than analysts expected. Single-family housing starts dropped 4.56% to 859,000 annualized, the lowest level since September 2025, according to U.S. Census data. Building permits, which signal future construction, fell 4% for the month.
Lawrence Yun, NAR's chief economist, said in a statement that "housing affordability is more affected by changes in mortgage rates" than job growth or income gains.
Ben Ayers, senior economist at Nationwide Financial, told investors to expect "home construction activity to remain moribund into 2027." He noted that "many builders are still trying to unload current projects with widespread use of price cuts and incentives cutting into profit margins."
Homebuilder sentiment dropped to its lowest level in 14 years in an October read released Tuesday by the National Association of Home Builders. Current sales, future sales expectations and buyer traffic all fell. Buyer traffic hit the lowest level in the index's history.
Robert Dietz, NAHB's chief economist, said in a statement that "housing remains squeezed by supply-side constraints and significant affordability challenges." He added that "higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines" despite persisting underlying demand.