September data shows housing market in a deep freeze

Fast-rising mortgage rates in September took a harsh toll on the housing market, according to new monthly data released today.

Pending home sales, a measure of signed contracts on existing homes, dropped 7.3% from August and were down 11.3% year-over-year, according to the National Association of Realtors.

This count reflects buyers out shopping in September, when the average rate on the 30-year fixed mortgage rose sharply. It started the month around 6.8% and hit 7.6% by the end of the month, according to Mortgage News Daily.

"Although job growth and income gains can support home purchases, housing affordability is more affected by changes in mortgage rates," said Lawrence Yun, NAR's chief economist in a release.

Regionally, sales dropped across the nation but the biggest month-to-month drops were in the South (-8.2%) and West (-9.2%). The South is usually the most active market and the West is the most expensive.

Home construction also took a hit in September. Both single-family housing starts and building permits fell much more sharply than analysts had predicted. Starts were down 4.56% to 859,000 annualized, according to the U.S. Census. That is the lowest level since September 2025. Building permits, which are a measure of future construction, fell 4% for the month.

"We expect home construction activity to remain moribund into 2027," said Ben Ayers, senior economist at Nationwide Financial in a note to investors. "Many builders are still trying to unload current projects with widespread use of price cuts and incentives cutting into profit margins. Housing starts, especially for single-family homes, could be low for much of the next year as the market adjusts to a higher rate environment – adding a modest drag to economic growth from reduced residential construction."

An October read on homebuilder sentiment Tuesday came in at the lowest level in 14 years, according to the National Association of Home Builders. Current sales, future sales expectations and buyer traffic all fell, with the latter seeing the lowest level.

"Housing remains squeezed by supply-side constraints and significant affordability challenges," said Robert Dietz, NAHB's chief economist in a release. "Demand persists, but higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines."