Pending Home Sales Hit Record Low in September as Mortgage Rates Near 7.4%

Pending home sales fell to a record low in September and homebuilding weakened, CNBC reported on Tuesday. The Federal Reserve is weighing further interest rate hikes, which could push mortgage costs higher.

The National Association of Realtors said its pending home sales index, which tracks contracts signed on homes that have not yet closed, fell 7.3% in September. The index was 11.3% below its level a year earlier and is the lowest since records began in 2001.

Wall Street had forecast a drop of just 0.4%.

Builders Pull Back

Commerce Department data showed total housing starts fell 5.2% in September, against an expected decline of 0.4%. Building permits slipped 0.2%, while the Dow Jones consensus had called for a 2% gain.

Reuters reported that single-family starts dropped 4.6% to a seasonally adjusted annual rate of 859,000 homes, which scales the month's pace to a full year. That is the lowest since September 2025. Single-family permits fell 4.0% to 845,000, the lowest since March 2023.

A National Association of Home Builders survey released Monday put builder sentiment in October at its lowest since June 2012, Reuters said.

Builders cited higher material costs, mortgage rates and diesel prices, along with worsening labor conditions amid an immigration crackdown.

Slow sales have left a glut of unsold new homes, which gives developers less reason to start projects. Reuters noted that a national housing shortage is still keeping prices elevated.

Mortgage Rates and the Fed

Freddie Mac's survey showed the 30-year fixed mortgage rate averaging 7.40% in the week before the report, the highest in nearly three years, according to Reuters. Rates are following Treasury yields as the US-Israeli war with Iran fans inflation.

CNBC put the 30-year rate at 7.43%.

CNBC reported that rates could rise further if the Fed raises short-term rates as expected over the coming months. The central bank might ordinarily ease policy to support demand, but this time it is fighting inflation, which it could put first.

The Fed's recent signals are covered in Fed minutes and October hike odds.

What It Means for Buyers

Lawrence Yun, chief economist at the National Association of Realtors, said conditions weakened in September because mortgage rates rose quickly. He said job and income gains can support purchases, but affordability responds more to changes in mortgage rates.

Chris Rupkey, chief economist at Fwdbonds, said the housing market will go dormant unless Washington reverses course and makes new homes cheaper.

Reuters reported that the affordability problem is a central theme of campaign messaging ahead of the Nov. 3 midterm elections.