United States pending home sales hit 25-year low

Pending home sales in the United States fell sharply in September, with the Pending Home Sales Index dropping to 66.0. This represents a 7.3% decline from August and an 11.3% decrease compared to the previous year, marking the lowest level since statistics began in 2001.

High mortgage rates are a primary driver of the slowdown. The average 30-year fixed mortgage rate reached 7.40% in mid-October. This increase in financing costs has weakened buyer purchasing power, even as employment and income levels remain stable. Additionally, new home construction has slowed, with September housing starts falling 5.2% from the previous month.

Despite the drop in transaction volume, home prices have not seen a widespread collapse. A low-interest-rate lock-in effect is occurring, as many existing homeowners hold mortgages with rates below 4% and are reluctant to sell and transition to higher current rates. This has limited the supply of existing homes on the market.

While the existing home market remains constrained, some relief is appearing in the new construction sector. Due to high construction loan interest and inventory pressures, approximately 43% of homebuilders are offering price reductions or financing incentives to attract buyers.