US Pending Home Sales Plunge 7.3% in September to Lowest on Record
US housing market indicators have fallen to their lowest levels since records began. The National Association of Realtors (NAR) reported on Monday (local time) that its Pending Home Sales Index for September came in at 66.0, down 7.3% from the previous month — the lowest level since records began in 2001. The index, which tracks homes under contract whose ownership has not yet transferred, fell far more than the Wall Street consensus of a 0.4% decline compiled by Dow Jones, and was down 11.3% from the same month a year earlier. Pending home sales are a leading indicator based on signed purchase contracts that have not yet closed, serving as a gauge of future existing-home sales.
Transactions and construction slumped at the same time. Construction figures were also weak. According to the Commerce Department, housing starts in September fell 5.2% from the previous month to a seasonally adjusted annual rate of roughly 1.22 million units. Single-family starts dropped 4.6% to 859,000, and single-family permits fell 4% to 845,000, the lowest level since 2023. Builders' outlook on the housing market has also deteriorated. The National Association of Home Builders (NAHB) said its Housing Market Index (HMI) for October fell 3 points from the previous month to 29 — the lowest in about 14 years since June 2012. A reading below 50 means more builders view housing market conditions as poor than good.
The direct cause of the decline is mortgage rates. The rate on 30-year fixed-rate mortgages in the US rose from around 6.8% in early September to about 7.6% by the end of the month. Lawrence Yun, NAR chief economist, explained that while job and income growth can support home buying, purchasing power is more heavily influenced by changes in mortgage rates.
There are forecasts that the housing slump could persist. Goldman Sachs economist Ronnie Walker predicted that elevated mortgage rates will further dampen home transactions. Because many existing homeowners took out loans at rates lower than current levels, the so-called 'lock-in effect' is persisting, making it difficult for them to sell and move. Markets see a high likelihood that the Federal Open Market Committee (FOMC) will hold rates steady at its meeting on the 27th and 28th before raising them again in December. Goldman Sachs projects existing-home sales of about 3.9 million units in 2027 — roughly 26% below the 2019 pre-pandemic level.
