Pending home sales sink to 25-year low as buyers flee high mortgage rates

By Aarthi Swaminathan

Pending home sales in September fell to the lowest level on record as mortgage rates surpassed 7%

Pending home sales offer an early read of how the housing market will fare in the coming months.

Contract signings to purchase homes fell in September to the lowest level on record, as buyers fled the housing market in the wake of the average 30-year mortgage rate climbing above 7%.

Pending-home sales, which refer to home transactions under contract but have not yet closed, fell in September to their lowest level since 2001, when the National Association of Realtors began tracking the figure.

NAR, which reported the data on Tuesday, attributed the sharp drop in home-buying demand to rising mortgage rates.

Pending home sales offer an early read of how the housing market will fare in the coming months.

The data suggests that home-buying demand has fizzled out. Pending home sales fell 7.3% in September from the previous month. They were also down 11.3% from the same month last year.

In the same month, surging oil prices and expectations of possible interest-rate hikes by the Federal Reserve pushed the 30-year mortgage beyond 7%. Higher mortgage rates carry higher borrowing costs for home buyers, so the jump pushed many out of the market.

Other parts of the housing market are grappling with weak demand. On Monday, home builders reported a gloomy outlook, as buyer traffic fell to a 14-year low.

When the average 30-year mortgage rate went from 7% to 7.5% this month, one of real-estate agent Chris Colgan's buyer clients was priced out because the mortgage payment on a house they were looking at would be $400 a month higher. They could not afford the higher payments.

Colgan, with the Real Brokerage in Virginia, told MarketWatch that he called up five different mortgage lenders and eventually found the buyers a 7.25% rate for their 30-year mortgage. They are now under contract on the home.

Buyers who are braving high mortgage rates are "looking for deals," Colgan said, "because they're seeing sellers start to reduce" asking prices.

Sellers, on the other hand, are getting lowball offers and are realizing that they have to adjust their expectations, Colgan said, adding: "You can feel the frustration in the air."

About 44% of homes listed on the market have undergone a price cut as of Oct. 18, according to data from ParclHQ, a real-estate-analytics platform. The median list price in early October was about $415,000, according to Realtor.com.

(Realtor.com is operated by News Corp subsidiary Move Inc. MarketWatch publisher Dow Jones is also a subsidiary of News Corp.)

Colgan offered two tips to home buyers looking for a deal on a house. Look at how long the home has spent on the market, and read the listing description closely.

If a home has been for sale for a month or more, it is an indicator that the homeowner may be willing to cut their asking price, Colgan said.

If the listing notes that the seller is "motivated" or asks buyers to "bring an offer," Colgan said that's another sign of their willingness to negotiate. In such scenarios, "we are definitely not going in and offering full price," the agent said.

Some buyers are offering up to $25,000 below the asking price, or asking for major repairs such as a new HVAC system after a home inspection, or seller credits for repairs. Colgan has even started coaching sellers to expect buyers to ask for more things based on the home's inspection report than they used to.

-Aarthi Swaminathan

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-21-26 0948ET