Macro

Pending home sales drop 7.3% in September, and builders are pulling back too

Contracts to buy existing homes fell 7.3% in September, NAR said. Housing starts came in below forecast, builder sentiment sank to its lowest since 2012, and both trade groups point to mortgage rates.

By James Mitchell · Oct 22, 2026, 6:00 AM EDT

For information only, not investment advice.

Contracts to buy existing homes slid hard in September. Pending home sales fell 7.3% from August and 11.3% from a year earlier, the National Association of Realtors said Tuesday. Contracts fell in all four regions, with the West down the most, followed by the South, Midwest and Northeast.

Construction cools, too

The construction numbers out the same day weren't much better. Housing starts ran at a seasonally adjusted annual rate of 1,221,000 in September, the Census Bureau and HUD reported, 5.2% below a revised August and 7.4% below September 2025. Ahead of the release, an Interactive Brokers economist wrote that the median forecast in the monthly Reuters poll of 27 forecasters was 1.31 million starts, with estimates ranging from 1.25 million to 1.35 million. Single-family starts fell 4.6% to an 859,000 rate.

One caveat from the government's own statisticians: Census flags the monthly and yearly changes in total starts, the monthly change in single-family starts and the monthly change in completions as not statistically significant. The 5.2% monthly decline in starts, for instance, carries a margin of error of plus or minus 11.8%. Read the monthly swings with that in mind.

Building permits came in at a 1,400,000 annual rate, down 0.2% from August and roughly in line with the 1.4 million median estimate cited in the same Interactive Brokers note. Single-family permits fell 4.0% to 845,000. CNBC reported that both single-family starts and permits fell much more sharply than analysts had predicted. Completions rose 2.2% from August to a 1,192,000 rate but were 14.0% below a year earlier.

Builders are in a sour mood. The October NAHB/Wells Fargo Housing Market Index, released Oct. 19, fell three points to 29, its lowest since June 2012. NAHB said 43% of builders cut prices in October, the highest share during the 2020-2026 period, with an average cut of 6%, and 65% used sales incentives.

What changes for your money

Both trade groups point at the same culprit. "Market conditions weakened in September due to fast-rising mortgage rates," said NAR Chief Economist Lawrence Yun. NAHB Chief Economist Robert Dietz said "higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines."

Two rate gauges tell the story, and they don't measure the same thing. Freddie Mac's weekly survey put the average 30-year fixed rate at 7.40% as of Oct. 15, unchanged from the prior week and up from 6.27% a year earlier. Mortgage News Daily's daily 30-year rate started September around 6.8% and hit 7.6% by the end of the month, CNBC reported.

For buyers and sellers, that is the crux. Yun said that although job growth and income gains can support home purchases, "housing affordability is more affected by changes in mortgage rates." If you're shopping for a newly built home, NAHB's survey shows the highest share of builders cutting prices during the 2020-2026 period, with 65% offering incentives.

Whether relief comes is a matter of opinion, not data. Yun said that because mortgage rates have risen much more than the Federal Reserve's short-term rate hikes, "mortgage rates could be topping out," but added that "increasing energy prices and the resulting inflationary pressure are highly uncertain." Ben Ayers, senior economist at Nationwide Financial, wrote in a note to investors that "We expect home construction activity to remain moribund into 2027," CNBC reported.

Tags: real-estate · interest-rates