September data shows the real estate market is deeply frozen

The rapid rise in mortgage rates in September had a serious impact on the property market, according to new monthly data released today.

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

This figure reflects buyers who were shopping in September, when the average rate for 30-year fixed-rate mortgages rose sharply. It started the month around 6.8% and reached 7.6% by the end of the month, according to Mortgage News Daily.

“Even though job growth and income gains can support home purchasing, housing affordability is more affected by changes in mortgage rates,” Lawrence Yun, NAR chief economist, said in a statement.

Regionally, sales fell across the country, but the largest monthly declines were recorded in the South (-8.2%) and West (-9.2%). The South is generally the most active market and the West the most expensive.

Residential construction was also affected in September. Single-family housing starts and building permits fell much more sharply than analysts expected. Housing starts fell 4.56% to 859,000 at an annualized rate, according to the U.S. Census. This is the lowest level since September 2025. Building permits, which measure future construction, fell 4% over the month.

“We expect homebuilding activity to remain moribund through 2027,” Ben Ayers, senior economist at Nationwide Financial, said in a note to investors. “Many builders are still trying to get rid of their current projects with extensive recourse to price reductions and incentives that reduce profit margins. Housing starts, particularly for single-family homes, could be weak for much of next year as the market adjusts to a higher rate environment – ​​which would add a slight drag to economic growth due to reduced residential construction.

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

“Housing remains constrained by supply-side constraints and significant affordability issues,” Robert Dietz, NAHB chief economist, said in a statement. “Demand persists, but rising mortgage rates, high construction costs and declining consumer confidence are keeping more buyers on the sidelines.”