The rapid rise in mortgage rates in September had a harsh effect on the housing market, according to new monthly data released today. Pending home sales, a measure of contracts signed on existing homes, fell 7.3% since August and 11.3% year over year, according to the National Association of Realtors. This count reflects that buyers went shopping in September, when the average 30-year fixed mortgage rate rose sharply. It started the month around 6.8% and hit 7.6% by the end of the month, according to Mortgage News Daily. In an aerial view, family homes line the streets of a neighborhood on May 23, 2026 in Thousand Oaks, California.Kevin Carter | Getty Images “While job growth and rising incomes can support home buying, housing affordability is most affected by changes in mortgage rates,” Lawrence Yun, NAR’s chief economist, said in a statement. Regionally, sales fell across the country, but the biggest monthly declines were in the south (-8.2%) and west (-9.2%). The South is usually the most active market and the West the most expensive. Housing construction was also affected in September. Both single-family home construction and building permits fell much more than analysts had anticipated. Construction starts decreased 4.56% to 859,000 annualized, according to the US Census. This is the lowest level since September 2025. Building permits, which are a measure of future construction, fell 4% on 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 unload current projects with widespread use of price cuts and incentives that reduce profit margins. Housing starts, especially for single-family homes, could be weak for much of next year as the market adjusts to a higher rate environment, adding a modest drag on economic growth due to reduced residential construction.” An October reading of homebuilder sentiment Tuesday hit the lowest level in 14 years, according to the National Association of Home Builders. Current sales, future sales expectations and buyer traffic all fell, with the latter recording the lowest level. “Housing continues to be pressured by supply constraints and significant affordability challenges,” Robert Dietz, NAHB chief economist, said in a statement. “Demand persists, but higher mortgage rates, elevated construction costs and lower consumer confidence are keeping more buyers on the sidelines.” Get Property Play delivered straight to your inbox CNBC’s Property Play with Diana Olick covers new and evolving opportunities for the real estate investor, delivered weekly to your inbox. Subscribe here to get access today.
