Pending sales drop to lowest level in 12 years
The number of signed contracts fell 4% from August to September as demand dried up, Redfin found. Meanwhile, inventory reached the highest level since 2020.
The latest Redfin data on pending sales in September suggests there will be a significant slowdown in closed deals in the fourth quarter.
Signed purchase contracts were at the lowest level since 2014, with the exception of the pandemic lockdown period in early 2020, according to the report. Pending sales are a leading indicator of closings over the next one to two months.
The 4% drop in pending sales from August to September coincided with a sharp rise in 30-year mortgage rates, which jumped more than half a percentage point last month. Rates were averaging around 6.7% at the beginning of September, according to Freddie Mac, increasing to 7.28% by early October.
A separate report released last week showed an even more marked slowdown in pending sales when measured on a weekly basis.
Closed sales were also down in September, hitting the lowest level since 2023. Most of those deals went under contract in July and August, a time when 30-year mortgage rates were starting to rise.
Where sales dipped the most: West Coast cities posted some of the biggest slowdowns in pending sales. Seattle pending sales were down 24.4% year-over-year, followed by Los Angeles (down 16%), San Diego (down 15.8%) and Anaheim (down 15.5%).
Those Southern California markets are among the most expensive in the U.S., while Seattle has seen a wave of layoffs in the technology sector, one of the region's leading industries.
Sellers are hanging on, for now: So far, sellers have not been pulling back as quickly as buyers, according to today's report. The total number of homes for sale rose 1.2% from August to September and is at its highest level since March 2020.
That means buyers who are still in the market should have more room to negotiate, according to Chen Zhao, Redfin's head of economic research.
"My best advice for sellers in this environment is to price realistically from the start and lean into any flexibility you can offer; a rate buydown or covering closing costs can go a long way when buyers are stretched thin," Zhao said.
Brian Connelly, a Redfin Premier agent in Boston, echoed that sentiment in his advice to sellers this fall: "If you're not pricing slightly below nearby comps and prepping your home meticulously, your home may very well linger on the market, leading to price cuts or delistings."