A sharp rise in mortgage rates in September hit the housing market hard, according to new monthly data released today.
According to the National Association of Realtors, the number of pending home sales, which measures the status of contracts for existing homes, has decreased by 7.3% since August, and by 11.3% from the same month last year.
The numbers reflect buyers shopping in September, when average interest rates on 30-year fixed mortgages skyrocketed. It started the month at about 6.8% and reached 7.6% by the end of the month, according to Mortgage News Daily.
Aerial view of homes lining neighborhood streets on May 23, 2026 in Thousand Oaks, California.
Kevin Carter | Getty Images
“While job growth and rising incomes may support homebuying, housing affordability will be significantly impacted by changes in mortgage rates,” NAR Chief Economist Lawrence Yun said in a release.
By region, sales decreased across the U.S., but the largest month-over-month declines were in the South (-8.2%) and West (-9.2%). The South is usually the most active market, and the West is the most expensive.
Housing construction also took a hit in September. Single-family housing starts and building permits were both significantly lower than analysts expected. According to the U.S. Census, construction starts fell 4.56% to an annual rate of 859,000. This is the lowest level since September 2025. The number of building permits, an indicator of future construction, fell 4% in the month.
“We expect housing construction activity to remain moribund through 2027,” Ben Ayers, senior economist at Nationwide Financial, said in a note to investors. “Many builders are still looking to exit current projects through widespread use of price reductions and margin-cutting incentives. Housing starts, particularly single-family starts, are likely to remain low for much of next year as the market adjusts to the rising interest rate environment, providing some drag on economic growth due to reduced home construction.”
Tuesday’s statistics on homebuilder sentiment for October hit the lowest level in 14 years, according to the National Association of Home Builders. Current sales, future sales forecasts, and buyer traffic all decreased, with the latter hitting its lowest level.
“Housing continues to be constrained by supply-side constraints and significant affordability challenges,” NAHB Chief Economist Robert Dietz said in the release. “Demand continues, but rising mortgage rates, rising construction costs and weak consumer confidence are putting more buyers on the sidelines.”
