US housing market faces pressure from rising mortgage rates and high prices

The United States housing market is experiencing significant volatility as rising mortgage rates and high home prices impact buyer activity. In September, existing home sales unexpectedly rose by 1.5% to a seasonally adjusted annual rate of 3.99 million units, largely due to downward revisions in August data. However, this growth is overshadowed by a broader slowdown; sales remain below the 4 million unit threshold for the second consecutive month and are down 2.2% compared to last year.

Mortgage rates have climbed sharply, with the 30-year fixed rate reaching approximately 7.4%, its highest level since late 2023. This surge in borrowing costs has contributed to a steep decline in pending home sales, which fell 4% in September—the largest monthly drop in over three years—reaching levels not seen since 2014 (excluding the 2020 pandemic period). Redfin reported that pending sales declined across all 50 major U.S. metropolitan areas.

Despite the sales slump, home prices continue to rise, with the median existing-home price increasing 1.3% year-over-year to $417,500. Inventory has also grown, with existing home supply rising 4.6% to 1.6 million units, providing buyers with more selection and potential negotiating leverage. However, the combination of high rates and elevated prices continues to strain affordability, leading to increased price cuts by sellers and a higher rate of failed purchase agreements.