Pending sales take a hit as mortgage rates sit at 7.5%
Signed contracts fell more than 8% year-over-year in September, but motivated sellers are out there and may opt to cut prices instead of waiting until spring.
Key points:
- With 30-year mortgage rates stuck above 7%, market activity has already slowed to more typical winter levels.
- Inventory is continuing to climb, but new listings are not. Data also indicates more potential buyers are choosing to rent until conditions improve.
- The prospect of mortgage rates staying higher for longer may prompt more sellers to be flexible on pricing, creating an opportunity for buyers in particularly slow markets.
With neither homebuyers nor sellers signaling much urgency to act, winter appears to be arriving early in the real estate market.
Homebuying activity has slowed significantly following the spike in 30-year mortgage rates, which remain around 7.5%, according to recent market data.
Signed contracts have fallen significantly
Pending sales for the past week were down 10.5% compared to a year ago, according to Compass Chief Economist Mike Simonsen, and down 8.4% year-over-year for the month of September. Inventory is continuing to build and is up 4.4% compared to the same period a year ago, Simonsen found, but not because new listings are coming online — homes are simply staying on the market longer.
With the rapid rise in mortgage rates, "the housing market is shifting with notably fewer offers being made right now," Simonsen said. "Supply is rising and we're starting to see shifts in the pricing data," he added, pointing to an uptick in price reductions but no meaningful drop in closed sales prices.
Zillow's latest market report offers similar findings. It estimates pending sales in September were down 8.5% compared to a year earlier, while closed sales were down 2.5% for the same period. The National Association of Realtors' existing sales report for September is scheduled to be released on Oct. 13.
Rental market showing 'continued strength'
With home purchases down, demand has moved to the rental market. Zillow estimates U.S. rent prices rose 2.7% year-over-year in September, the biggest annual increase since April 2025.
"The for-sale market's slowdown was predictable given where mortgage rates currently stand, but the continued strength in the rental market is more surprising. Buyers on the margins are finding the monthly savings for renting too good to pass up, even if their long-run goal is still to purchase a home," Mischa Fisher, chief economist at Zillow, said in the housing report.
"We expect sales to remain lower than last year through the fourth quarter. However, it's not out of the question that rates will decline as rapidly as they rose, which would bring both buyers and sellers back to the market. At this point in the calendar, the question is whether they would sit out until next spring," Fisher added.
The affordability picture looks quite different for prospective buyers and renters, according to the Zillow report. More than a third (34.4%) of a median-income household's earnings went to pay a typical monthly mortgage in September, up from 33.7% a year earlier. For renters in the same income bracket, a typical rental rate ate up just 26.3% of their earnings, down slightly from 26.4% a year ago.
If 30-year mortgage rates remain in the 7.5% range, potential buyers may continue to bide their time and rent. A recent survey by John Burns Research and Consulting found that only 6% of U.S. homeowners and renters would accept a rate in that range. The "magic mortgage rate," meaning one that about half of those surveyed would find acceptable, is between 5% and 5.49%, according to the survey results.
Are sellers ready to give in?
While some sellers will also hold out for better conditions, those who are tired of waiting could be willing to be flexible on price, according to Simonsen.
A year ago, mortgage rates were around 6.3% and expected to decline in 2026, stoking hopes for a more active spring season. While rates briefly dropped below 6% in February, they began rising with the onset of the Iran war, and concerns about inflation and debt have continued to push rates higher this fall, making the timeline for lower rates "highly uncertain," according to NAR Chief Economist Lawrence Yun. More sellers may be coming to the conclusion that waiting isn't worth it.
"For buyers willing to pay attention, finding a motivated seller can create bargaining power," Simonsen said.
Another trend that may be on the horizon is a rise in short sales, according to Simonsen, because homeowners who bought a house in the past four years with a low down payment could be upside down on their mortgage. He expects overall distressed sales like foreclosures to remain low into next year, however, given the strong job market and the solid equity most homeowners have along with low locked-in mortgage rates.