Seven percent mortgages are doing what seven percent mortgages do: sending buyers home. The pending home sales slump has landed, and it is the ugliest the housing market has looked in more than a decade. Redfin reports that U.S. pending sales fell 4% in September, sinking to their lowest level since spring 2014, if you set aside the pandemic freeze of April 2020.
That 4% drop, seasonally adjusted, is the biggest monthly fall in more than three years, according to The MortgagePoint. The culprit is not hard to find. Mortgage rates climbed back above 7%.
Why Pending Home Sales Fell Everywhere at Once
Here is the detail that should make buyers and sellers sit up. Pending sales fell in all 50 of the most populous U.S. metros, the first time that has happened in three years, Redfin says. The last time was September 2023. That was also the last time rates stayed above 7% for a sustained stretch.
Year over year, pending sales dropped in every major metro, led by Seattle and Southern California. One aggregator pegs Seattle’s decline at 24.4%, with Los Angeles, San Diego and Anaheim each down more than 15%. Treat those metro figures with care until you check them against Redfin’s own table.
Chen Zhao, Redfin’s head of economic research, put it plainly: “It’s not surprising that when rates climb above 7%, fewer people buy homes because fewer people can afford them.”
Hard to argue with that one.
The Rate Climb Behind the Housing Market Slowdown
The numbers on rates tell the story. Fox Business reported that Freddie Mac’s 30-year fixed rate averaged 7.4% in the week reported Oct. 8. That was up from 7.28% a week earlier, and it marked the seventh straight weekly rise.
A year ago, the same rate sat at 6.34%. Run the math on a typical loan, and a point of rate is real money every month. No wonder deals are drying up.
The pain also shows up in the pipeline. Redfin says 14.5% of homebuying deals fell through in September, the highest share in its records. If that sounds familiar, our earlier look at home deals falling apart as buyers gain leverage shows how fast cancellations have been building. Closed sales slipped 1.6% from August, to their lowest level since the end of 2023.
Here’s the Thing for Buyers and Sellers
So who is actually winning right now? Not many people. Sellers face a thinner crowd of buyers. Buyers face payments that feel like a different decade.
Redfin notes that most September closings went under contract in July or August. Rates were already rising then, and economic worries kept shoppers on the sidelines. That means the real damage from weak contract signings may still be working its way through the system.
Prices have not cracked yet. U.S. home prices rose 1.3% year over year in September, the smallest gain since February. Redfin warns that slow sales could soon mean flat or falling prices.
The picture is not the same everywhere. Tight supply is propping up prices in the Northeast and Midwest, while some Sun Belt markets face weaker demand and falling prices. The high-priced West Coast is taking the hardest hit. In Seattle, slower tech hiring is making things worse, per Futu News.
One Caveat on the Numbers
A quick note on the label. The “near 12-year low” is Redfin’s own measure, built from its brokerage data. It is not the National Association of Realtors’ Pending Home Sales Index, which showed a 0.3% gain in August. The two gauges do not always move together, so do not mix them up.
What to Watch as the Home Sales Slump Deepens
The data keeps coming. NAR releases September existing-home sales today, and Freddie Mac’s next weekly rate reading is expected Thursday. For a wider view of where markets stand, see our Tuesday Market Watch on household debt and home sales. If rates keep climbing, the next headline might not be about sales at all. It could be about prices.
For now, the housing market is doing something rare. It is standing perfectly still, and everyone is waiting to see who blinks first.
