Why US Pending Home Sales Hit a Record Low as Mortgage Rates Hold Near 7.4%

Pending home sales in the United States fell 7.3% in September to the lowest reading in the history of the National Association of Realtors' index, the association reported on October 20, according to HousingWire. Contracts were 11.3% below September 2025, and all four regions recorded monthly declines.

The drop followed a sharp run-up in borrowing costs. Freddie Mac's weekly average for the 30-year fixed mortgage held at 7.40% in the weeks of October 8 and October 15, according to Federal Reserve Bank of St. Louis data. For the week of October 15, Trading Economics gives the year-earlier figure as 6.27%.

What the October 20 Release Measured

The index tracks contracts signed during a month, not homes that have closed. NAR says monthly contract activity parallels closed existing-home sales in the following two months. A pending sale usually closes within one or two months of signing, although timing can vary with mortgage financing, inspections and appraisals.

The index is set so that 100 equals average contract activity in 2001, the first year NAR examines. Its sample covers about 40% of multiple listing service data each month.

HousingWire puts the September reading at 66.0, the lowest in the index's history. The index had risen 0.3% in August before its 7.3% fall in September.

HousingWire Intelligence's weekly count points the same way. It recorded 51,947 new pending single-family sales in the week ending October 16, down 13.1% from a year earlier.

Pending contracts are early indicators of closings, according to MortgagePoint's account of the release.

Mortgage Rates Remain the Stated Cause

NAR Chief Economist Lawrence Yun said market conditions weakened in September because mortgage rates rose quickly. He said rates had climbed far more than the Federal Reserve's short-term increases, and that they could be topping out. He called the outlook for energy prices and inflation highly uncertain.

Freddie Mac's weekly series rose from 6.95% in the week of September 17 to 7.03% on September 24 and 7.28% on October 1, according to FRED. It reached 7.40% on October 8 and held there on October 15. Trading Economics says the October 1 reading was the highest since November 2023, and that Freddie Mac's chief economist said the housing market was still supported by favorable economic conditions despite elevated rates.

The American Bankers Association's summary also cites Freddie Mac's rate at 6.66% at the end of August.

Trading Economics described the October 8 reading as a seventh straight weekly increase. It attributed the rise to a bond market selloff and expectations of higher rates for longer, and noted that 10-year Treasury yields were at their highest level in decades. It linked the flat reading on October 15 to lower Treasury yields that week, and described it as the eighth consecutive week without a decline.

The 15-year average, which Trading Economics reports separately, reached its highest level since May 2024 on October 8. It eased to 6.71% on October 15, from 6.73%.

Yun said buyers and sellers may be holding back until mortgage rates move in their favour.

Where the Decline Is Deepest

Pending contracts fell in every region in September, and the West posted the steepest drop. Western contracts were down 9.2% from August and 15.0% from a year earlier. The South fell 8.2% month over month and 12.0% year over year.

The Midwest fell 6.5% month over month and 8.7% year over year. The Northeast had the smallest monthly drop, at 4.2%, and fell 9.4% from a year earlier.

Index levels differ sharply by region. HousingWire gives 49.3 for the West, 59.0 for the Northeast, 67.3 for the Midwest and 79.2 for the South.

MortgagePoint reports that pending sales declined year over year in all four regions, so the annual fall was not confined to one part of the country.

NAR's metro figures, based on Realtor.com Economics data for the 50 largest metros, show year-over-year declines even in the strongest markets. Nashville had the smallest fall at 2.0%, followed by Hartford at 2.1% and San Francisco at 3.5%. San Jose fell 4.6%, Buffalo 5.6%, Richmond 5.8%, Austin 5.9%, Pittsburgh 6.2%, Memphis 6.3% and San Antonio 7.1%.

The list shows that even the markets with the smallest declines among the 50 largest metros fell year over year.

New-Home Sales Moved in the Other Direction

The Census Bureau's new-home figures for August show a different pattern. According to the American Bankers Association's summary, posted on September 24, sales reached 684,000. That was up 6.4% from July, 2.0% below August 2025, and above a 615,000 market forecast cited in the same summary.

The monthly gain largely came from the Midwest and South, while sales fell in the Northeast and West. The stock of new homes for sale stood at 483,000, unchanged from the prior month and down 2.0% from a year earlier. At the current sales pace, that is 8.5 months of supply.

The median new-home price was $393,700. It rose 0.4% from July and fell 5.8% from a year earlier.

The new-home figures cover August, a month before NAR's September pending data. They measure newly built homes, while NAR's index tracks pending sales of existing homes.

What Investors, Lenders and Builders Face Now

Yun said a limited number of distressed properties is helping keep home prices steady, even as buyers may be holding back. He also said job growth and income gains can support home purchases, but housing affordability is more affected by changes in mortgage rates.

For lenders, HousingWire reports that Fannie Mae cut its 2027 mortgage origination forecast by 18% in its October outlook. The summary links the cut to expectations that rates will stay higher. The weekly Freddie Mac average has held at 7.40% for two weeks, after several straight increases.

For builders, the new-home data show 8.5 months of supply and a median price 5.8% below a year earlier. August sales were still 2.0% below their year-earlier level, while the September pending data show contract signings falling in every region.