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The U.S. housing market is experiencing a downturn, with new data showing significant declines in pending home sales, home construction, and builder sentiment. The National Association of Realtors reported a 7.3% drop in signed contracts on existing homes, attributing this to fast-rising mortgage rates.
In September, home construction also faced challenges, with single-family housing starts and building permits both declining sharply. According to the National Association of Home Builders, homebuilder sentiment fell three points to 29 in October, marking the lowest level since June 2012. Robert Dietz, the chief economist at the NAHB, stated, "Housing remains squeezed by supply-side constraints and significant affordability challenges."
The Realtor.com data for September highlighted the impact of rising mortgage rates, which surged nearly 40 basis points during the month, climbing above 7% for the first time since January 2025. This led to a decrease in new listings and a substantial fall in pending sales. Price cuts also reached their highest September levels since 2018, with 20.8% of listings experiencing reductions.
Looking ahead, the housing market's outlook remains uncertain. Economists, including Sara Godfrey from Oxford Economics, predict that the market will remain stagnant throughout next year. Oliver Allen from Pantheon Macroeconomics forecasts a "meaningful slowdown" in new home sales due to the recent surge in rates.