Americans signed fewer contracts to buy homes in September, with pending sales falling 4% from August as expensive mortgages squeezed household budgets, Redfin reported October 12. The retreat is putting pressure on sellers to lower prices or help cover buyers’ costs.
The seasonally adjusted decline was the largest monthly drop in more than three years. Contract signings reached their lowest level since spring 2014, apart from April 2020, when the pandemic disrupted the housing market.
Pending sales measure homes that have gone under contract but have not yet closed. They provide an early indication of future transactions, although some agreements fall through. For brokers, lenders and sellers, fewer signings mean a thinner pipeline of business.
The borrowing squeeze has continued into October. Freddie Mac’s average 30-year fixed mortgage rate reached 7.03% on September 24, rose to 7.28% in the survey released October 1 and climbed to 7.40% on October 8. The latest reading compares with 6.30% a year earlier.
That difference carries a substantial monthly cost. On a $393,895 home—the September median sale price reported by Redfin—a buyer putting 20% down would borrow $315,116. At 7.40%, a standard 30-year loan would require about $2,182 a month in principal and interest, compared with about $1,950 at 6.30%.
The increase is roughly $231 a month, or $2,776 a year, for the same house and loan amount. Those calculations exclude property taxes, insurance and other ownership expenses. Actual mortgage offers also vary with credit, fees and lender terms.
The sales slowdown was widespread. Pending purchases declined from a year earlier in all 50 of the most populous metropolitan areas Redfin tracks, the first such sweep since September 2023. Seattle’s decline was 24.4%, followed by Los Angeles at 16%, San Diego at 15.8% and Anaheim, California, at 15.5%.
High prices make those markets particularly sensitive to financing costs: a rate increase applies to a larger loan balance, making the payment harder to absorb.
Buyers who remain in the market are gaining negotiating room. Redfin reported that 60.5% of homes sold in September went for less than their original asking price, while 19.8% of sellers with active listings reduced their asking price.
The median sale price still increased 1.3% from a year earlier to $393,895. Slower price growth is therefore not the same as a nationwide price decline, and a discount from an asking price does not necessarily mean a property sold below its previous value.
More choices are also giving buyers greater freedom to walk away. Redfin reported that 14.5% of September homebuying contracts were canceled, the highest share outside March and April 2020. Sellers face the risk of restarting the marketing process after expecting a sale.
Chen Zhao, Redfin’s head of economic research, said buyers have more scope to negotiate over prices, repairs and closing costs. She urged sellers to price realistically and consider concessions, including mortgage-rate buydowns.
Such arrangements require care. A temporary buydown reduces payments for a limited period; a permanent rate reduction works differently. Buyers need to understand the eventual payment and the terms of the financing before treating a concession as lasting affordability relief.
Zillow’s separate September report reinforced the slowdown, showing newly pending sales down 8.5% from a year earlier. Its estimate of completed existing-home sales showed a 2.5% annual decline, but that figure is a preliminary nowcast, rather than a final count.
Zillow chief economist Mischa Fisher expects sales to remain below year-earlier levels through the fourth quarter. A rapid decline in rates could bring buyers and sellers back, he said, although some might wait until spring.
The next test is whether October’s borrowing costs produce another drop in signed contracts. Zillow expects to release its October market report November 5.
JBizNews Desk | New York
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