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Pending home sales dropped 7.3% in September to 66.0, the lowest reading since the National Association of Realtors began the index in 2001. Economists had expected a drop of about half a percent, so the miss was large. The index counts signed contracts on existing homes, which makes it an early warning for closings in the next month or two, and NAR and analysts tie the drop to a surge in mortgage rates, with the 30-year rate at 7.40%. This piece explains what pending home sales measure, how far September fell, what other housing data shows, and what it could mean if you are buying, selling, or waiting.
What pending home sales measure
A pending sale is a home under contract that has not yet closed. Contracts usually close one to two months after they are signed, so the index tends to move before the monthly existing-home sales report does. That is why economists watch pending home sales, and why a reading of 66.0 matters more than a single month of closings. It says that fewer buyers signed contracts in September than at any point in the index’s history.
The numbers came from NAR by way of Reuters, as summarized by Traders Union. The index fell 7.3% from August and was down 11.3% from a year earlier.
Contract signings declined in all four regions of the country. The West fell the most, by 9.2%, and the South, the largest housing market, was down 8.2%, according to a report in the Seoul Economic Daily. The same report did not give figures for the Northeast or the Midwest, so those are not included here.
Why September was so weak
The timing lines up with borrowing costs. Freddie Mac put the average 30-year fixed rate at 7.40% in mid-October, the highest in about three years. The Mortgage Professional report discussed below puts the rate a year earlier near 6.3%. We covered the climb in our report on mortgage rates hitting 7.4%, and the longer-term pressure on Treasury yields in our piece on the 10-year yield near 5.1%. When the cost of a loan jumps, the monthly payment on the same house rises with it, and some buyers who qualified in the summer no longer do.
NAR chief economist Lawrence Yun said, in remarks as reported by the Seoul Economic Daily, that conditions worsened sharply in September because of the surge in mortgage rates, and that both buyers and sellers seem to be waiting on the sidelines until rates move in their favor. That second point is worth pausing on. Pending home sales fall when buyers pull back, and they also fall when owners decide not to list, because a house that never goes on the market never gets a contract.
What other housing data shows
Another report points the same way. Redfin’s September data, covered by Mortgage Professional on October 13, found that contract signings fell 4% from August on its own seasonally adjusted measure, the steepest one-month drop in more than three years. It also reported that pending sales fell from a year earlier in all 50 of the most populous metro areas, the first time that happened since September 2023.
Redfin’s numbers show strain in other places too. About 14.5% of September contracts were canceled, the highest share in Redfin’s records outside the early months of the pandemic, and active listings rose 1.2% from August to the highest level since March 2020. About 60.5% of homes sold below their original list price. The median sale price was $393,895, up 1.3% from a year earlier, the smallest annual gain since February. Redfin and NAR use different methods, so their percentages should not be compared directly, but the direction is the same.
What it means if you are buying
Higher rates, and the slump in pending home sales they helped cause, raise the monthly cost of every price tier, and the effect is easy to underestimate. For a rough sense of scale, our worked example in how much house can I afford shows how a rate change moves the price you can handle at the same payment. With more homes sitting on the market and more sellers cutting prices, buyers who can still qualify may have more room to negotiate than they did last spring. That is a general observation from the data, not a promise about any particular listing.
Buyers also need to think about the contract itself. With cancellations at their highest in Redfin’s records outside the pandemic’s start, a buyer should confirm financing early, understand the inspection and appraisal terms, and keep some cash available if a deal changes late. A lender can explain how a rate lock works and what it costs to extend one.
What it means if you are selling
The pending home sales slump and the Redfin data suggest sellers face a harder market. One Boston agent quoted in the Redfin report advised sellers to price 5% to 10% below their first expectations, and the share of homes selling under list price is high. Sellers who must move in a market with weak pending home sales may need to be flexible on price or terms. Those who do not have to sell may decide to wait, which is exactly what Yun described, and it keeps inventory tight even as demand falls.
What to watch next in pending home sales
The next signals are the existing-home sales reports for October and November, when September’s contracts turn into closings, and the weekly Freddie Mac rate. If the 30-year rate eases, contract signings could recover quickly, since many buyers are waiting. If it stays above 7%, closings will probably look weak through the winter. Treasury yields, which feed into mortgage rates, are the swing factor. This article is general information, not financial or housing advice, and anyone making a purchase or sale decision should talk with a licensed professional about their own numbers.
Editor’s take
A record low in pending home sales does not mean prices are about to collapse. The median sale price rose 1.3% in the Redfin data, which is slow growth and not a crash. What it does show is a market stuck between two groups who are each waiting for the other to move. Buyers want lower rates, sellers want higher offers, and September is what that standoff looks like in a spreadsheet. The number to watch is the mortgage rate, because it moves the whole picture.
