Seven percent mortgage rates are back, and buyers are backing off. Redfin's seasonally adjusted figures show pending deals fell 4% in September versus August, the sharpest month-over-month slide in more than three years. That pushed contract signings to their weakest level since 2014 outside the early 2020 Covid onset.
"The mood in the real estate industry has significantly shifted," said Daryl Fairweather, Redfin's chief economist. "When interest rates go up like this, fewer people can afford to buy homes, which means sales have to fall."
Listings rose to their highest mark since March 2020 even as nearly one in five sellers trimmed asking prices in September. Redfin also reported that 14.5% of purchase agreements collapsed, a record share in the firm's data.
Freddie Mac pegged the average 30-year mortgage at 7.4% as of Oct. 8, up from 6.66% in late August. At that level, rates are approaching a three-year high, exceeding the year-ago mark by more than one percentage point.
Seven percent mortgage rates reset what buyers can afford almost overnight. Market Briefs reads housing data free every morning.
Redfin said September's rate surge knocked demand back to the post-foreclosure crisis era, and pending sales decreased across all 50 major metros it follows, a pattern not seen since September 2023. Lean inventory is propping up prices in many Northeastern and Midwestern markets, whereas parts of the Sun Belt are seeing weaker demand and falling prices.
The West Coast saw the toughest pullback, where lofty prices make buyers especially sensitive to higher borrowing costs. Seattle posted the largest year-over-year drop in pending sales among big metros at 24.4%, and its median sale price fell 4.4%, both the steepest declines nationally. Los Angeles, San Diego, and Anaheim each logged pending-sales drops topping 15%. Redfin noted Southern California homes are some of the costliest in the US, so rate jumps pack an extra punch there.
Higher borrowing costs are cooling demand, nudging inventory higher, and prompting more price cuts and canceled deals. Depending on where housing exposure shows up in your holdings, local conditions matter: parts of the Northeast and Midwest still have a floor under prices thanks to lean supply, while the West Coast and some Sun Belt markets are already feeling the chill.
Pending sales lead closings by about two months, so this is the leading edge. Get the free Market Briefs daily newsletter and follow it.
