⏱ 2 min read
Pending sales hit an all-time low in September while starts and permits undershot forecasts as mortgage rates stayed above 7%.
September data show the U.S. housing market slumping as the Federal Reserve considers further interest-rate increases. The National Association of Realtors (NAR) reported pending home sales fell 7.3% to an all-time low in records back to 2001, while Commerce Department figures showed weaker housing starts and permits.
September prints miss by wide margins
The report said Wall Street had looked for just a 0.4% drop in pending sales. Set against that forecast, 7.3% against 0.4% is roughly 18 times the expected fall. Privately owned housing starts declined 5.2% on the month versus an expected 0.4% decline, which is about 13 times deeper than forecast. Building permits fell 0.2% against a Dow Jones consensus for a 2% gain, a shortfall of 2.2 percentage points.
Single-family permits totaled 845,000, down 4% from August and the lowest since 2023, according to Commerce. The report also said home builder sentiment is at lows not seen in 14 years. “Market conditions weakened in September due to fast-rising mortgage rates,” said Lawrence Yun, NAR’s chief economist.
Mortgage rates and lock-in feed through to activity
The rate on a 30-year mortgage stayed above 7% for most of September, ending the month around 7.6%, according to Mortgage News Daily. The report added that more than 95% of mortgage borrowers have rates below the prevailing level, and 65% are 2 percentage points below, a setup consistent with the “lock-in” effect that restricts turnover.
Goldman Sachs economist Ronnie Walker wrote that housing is likely to weaken further before stabilizing. “In 2027, we expect the headwind from affordability—reignited by the recent rebound in mortgage rates—to increasingly dominate, weighing further on activity,” he wrote. Goldman forecasts residential investment to decline 2.5%, 4% and 1% over the next three quarters, sees single-family starts at 875,000 in 2027, and projects existing home sales of 3.9 million, which it noted would be 26% below 2019 levels. Walker attributed those middling levels to the lock-in effect and deteriorating affordability.
According to the CME Group’s FedWatch tool, markets expect the Fed to hold rates next week, with futures implying a strong chance of a quarter-point hike in December and another in March 2027. Yun offered one point of optimism: “Given that mortgage rates have already risen much more than the Federal Reserve’s short-term interest rate hikes, mortgage rates could be topping out.”
Source: CNBC.
This article was written with AI assistance and reviewed by an editor.
This content is for informational purposes only and does not constitute financial advice.
🧠 HafidWatch Take
While mortgage rates remain high and continue to suppress housing activity, the possibility that these rates have peaked suggests a potential slowdown in the lock-in effect. If mortgage rates stabilize or decline, turnover could gradually increase, helping to ease affordability pressures. This shift might moderate the projected declines in residential investment and home sales, offering a more optimistic outlook beyond the forecasted downturns for the next few quarters.
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