U.S. Housing Market Hits Year-Long Lows as Mortgage Rates Climb

Key points

• Existing-home sales reached a seasonally adjusted annual rate of 3.99 million in September, down 2.2% from the previous year.
• Pending sales hit their lowest level since 2014, excluding the 2020 pandemic lockdown, according to Redfin.
• 30-year mortgage rates jumped from 6.7% in early September to 7.28% by early October, limiting buyer qualification.
• Inventory rose 1.9% to 1.60 million units, representing a 4.8-month supply, the highest since March 2020.
• The median existing-home price increased 1.3% year-over-year to $417,500, marking the 39th consecutive month of gains.

Background

The current slowdown follows a period of elevated inflation and a Federal Reserve rate hike in September 2026, which aimed to address persistently high prices. Consumer sentiment had recently dropped to its second-lowest level in decades, driven by energy costs and inflation expectations. This housing weakness occurs against a backdrop of broader economic caution, where rising borrowing costs are suppressing consumer spending across sectors.

How outlets are covering it

NAR Chief Economist Lawrence Yun noted that while September saw a slight monthly gain, August and September were the slowest months of the year, with rising rates reducing buyer eligibility. Redfin data highlighted a sharper decline in pending sales, with West Coast cities like Seattle and Los Angeles seeing year-over-year drops of 24.4% and 16%, respectively. While NAR reported a 1.5% month-over-month sales increase, Redfin emphasized a 4% drop in pending contracts from August to September. Both sources agree that inventory is rising, giving buyers more negotiating power, but Redfin suggests sellers must offer incentives like rate buydowns to compete.

Why it matters

The divergence between closed sales and pending contracts signals a likely slowdown in Q4 closings. With mortgage rates exceeding 7%, affordability remains a critical barrier, potentially leading to further price adjustments or delistings if sellers do not adapt to the shifting market dynamics.

What to watch

Analysts expect continued pressure on the housing market as mortgage rates remain elevated. Sellers may need to offer more incentives to attract buyers, while the rising inventory could lead to increased negotiating power for purchasers in the coming months.