US Pending Home Sales Fall to a Nearly 12-Year Low as Mortgage Rates Return to 7%

The US housing market is absorbing a fresh wave of rate shock.

On October 12, seasonally adjusted data from real estate brokerage Redfin showed that pending home sales fell 4% month over month in September, the largest single-month decline in more than three years, hitting the lowest level since 2014. Meanwhile, active listings rose to the highest level since March 2020.

The core driver of this round of pressure is the rapid climb in mortgage rates. According to Freddie Mac data, the average rate on a 30-year fixed mortgage rose to 7.4% on October 8, a sharp jump from 6.66% at the end of August, reaching the highest level in nearly three years and more than one percentage point above a year earlier.

The demand hit from the sudden rate increase has spread across all major US metro areas. Pending sales fell in all 50 major metropolitan areas tracked by Redfin, the first such broad decline since September 2023, when mortgage rates were also elevated.

Redfin Chief Economist Daryl Fairweather said:

Sentiment in the real estate industry has shifted significantly. When rates rise like this, fewer people can afford to buy a home, and sales are bound to decline.

Sellers cut prices, and deal cancellations hit a record

The contraction in demand has fed directly into transaction activity.

Redfin data showed that nearly one in five sellers lowered their asking price in September, buyers' negotiating position strengthened markedly, and the rate of canceled purchase contracts rose to 14.5%, the highest level since the firm began keeping records.

The continued increase in homes for sale has further changed the supply-demand balance. Active housing supply rose in September to the highest since March 2020, giving buyers more choices, but high financing costs still leave actual transactions facing many obstacles.

The impact of this rate shock varies by region and shows clear divergence. Housing supply in the Northeast and Midwest remains relatively tight, and home prices there still have some support, while some Sun Belt markets face the dual pressure of weakening demand and falling prices.

The West Coast has been hit hardest, as high home prices make local buyers especially sensitive to rising borrowing costs.

Among them, Seattle posted the largest pending sales decline among major metro areas, down 24.4% year over year, with a slowdown in tech hiring further intensifying the pressure from higher rates. Seattle's median sale price fell 4.4% year over year, also the largest decline in the country.