Signed contracts on existing homes retreated in September, with pending home sales down 7.3% from August and 11.3% from a year earlier, the National Association of Realtors reported. The period overlapped with a jump in the 30-year fixed mortgage rate that began near 6.8% and ended the month around 7.6%, per Mortgage News Daily. As NAR chief economist Lawrence Yun put it, "Although job growth and income gains can support home purchases, housing affordability is more affected by changes in mortgage rates."
Every major region saw a monthly pullback, led by the South at negative 8.2% and the West at negative 9.2%. The South is typically the most active market, while the West is the priciest.
Homebuilder confidence also slid. An October gauge from the National Association of Home Builders hit a 14-year low, with weaker readings spanning present sales, anticipated sales over the coming months, and buyer traffic - the softest of the three. "Housing remains squeezed by supply-side constraints and significant affordability challenges," said Robert Dietz, NAHB's chief economist. "Demand persists, but higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines."
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Supply is not riding to the rescue. The U.S. Census said single-family housing starts fell 4.56% in September to a 859,000 annualized rate, the weakest since September 2025, while building permits declined 4%. Ben Ayers, a senior economist with Nationwide Financial, commented, "We expect home construction activity to remain moribund into 2027," citing price cuts and incentives that are squeezing margins. He also noted that, for much of the next year, activity in housing starts - particularly in single-family building - may remain subdued, "adding a modest drag to economic growth from reduced residential construction."
Why it matters for your portfolio: softer contract activity, a dour builder outlook and weaker starts point to a tougher backdrop for homebuilders and mortgage-sensitive plays, while scarce supply can still support prices on existing inventory. Rate paths will likely steer the next move for housing-linked stocks and credit.
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