Pending Home Sales Fall to Near 12-Year Low

You’ll have to time travel back to the spring of 2014 to find U.S. pending home sales this low.

According to a new Redfin report, pending sales are at their lowest level since spring 2014—except April 2020, when the pandemic brought the housing market to a halt.

Redfin said pending home sales fell 4% from the previous month in September on a seasonally adjusted basis. That’s the biggest monthly drop in more than three years.

According to the online brokerage, this is a real-time indicator of what’s happening in the housing market; fewer homes went under contract in September largely because mortgage rates rose steadily, surpassing 7% by the end of the month.

All 50 Top Metros Felt Declines

Redfin’s figures are seasonally adjusted, with the exception of median sale price data and mortgage rate data.

For the first time in three years, pending home sales declined in all 50 of the most populous U.S. metros, Redfin noted. The last time that happened was September 2023, which was also the last time mortgage rates surpassed 7% for a sustained period, Redfin said.

The West Coast had the biggest declines.

Seattle posted the biggest drop (-24.4% year over year), followed by Los Angeles (-16%), San Diego (-15.8%) and Anaheim, California (-15.5%). Redfin said those Southern California metros are among the nation’s priciest, so rising mortgage rates hit them hard, pricing many on-the-fence buyers out.

Seattle is also expensive, and a bumpy local job market is curbing demand.

Redfin reported that closed home sales also fell nationwide in September, falling 1.6% month over month to their lowest level since the end of 2023. Many deals that closed in September went under contract in July or August, when rates were moving upward, and widespread economic uncertainty pushed many would-be buyers to the sidelines, Redfin noted.

The weekly average mortgage rate climbed to 7.28% at the end of September, the highest level in three years, Redfin said.

“It’s not surprising that when rates climb above 7%, fewer people buy homes because fewer people can afford them,” said Chen Zhao, Redfin’s Head of Economic Research. “But dig a little deeper, and there’s a silver lining on both sides. For buyers, less competition means more room to negotiate: on price, on closing costs, on repairs, and sometimes sellers even pay for a mortgage-rate buydown. Slow sales also mean prices may flatten or fall in the not-so-distant future. Sellers should remember that while many house hunters have pulled back, there are some people who need to move and are still buying homes. My best advice for sellers in this environment is to price realistically from the start and lean into any flexibility you can offer; a rate buydown or covering closing costs can go a long way when buyers are stretched thin.”

Prices Are Losing Steam

Rising mortgage rates and persistently high prices are bound to price many potential buyers out of the market, Redfin said. The median U.S. home-sale price rose 1.3% year over year to $393,895 in September. That’s the smallest increase since February.

A few other data points are showing that prices may be losing a bit of steam:

The median asking price fell 0.5% month over month in September. On a year-over-year basis, asking prices rose 0.6%, the smallest increase since April, Redfin said.

That loss of momentum could help buyers with affordability.

Redfin noted that 60.5% of homes that sold in September went for less than their original asking price, continuing an 18-month streak of roughly 3 in 5 homes selling below asking price. It said 1 in 5 (19.8%) U.S. home sellers with active listings dropped their asking price in September.

The share of home sellers cutting prices rose in 43 of the 50 most populous U.S. metros.

Supply Hits Highest Level in Six Years

The total number of homes for sale rose 1.2% from a month earlier to its highest level since March 2020, Redfin said.

It reported the pool of supply is widening as sellers steadily put the homes on the market while buyers pull back. Redfin noted that new listings rose 0.3% month over month, similar to the small swings the brokerage has noted over the last year.

Redfin said sellers aren’t pulling back the way buyers are, but new listings aren’t jumping. While some homeowners are putting their homes on the market because they need to, some are concerned about market conditions.

“For the last decade, there was almost a certainty that if you listed a home, it would sell–and it would usually sell quickly, with multiple offers,” said Brian Connelly, a Redfin Premier agent in Boston. “Now, the calculus has changed. If you’re not pricing slightly below nearby comps and prepping your home meticulously, your home may very well linger on the market, leading to price cuts or delistings. If you’re selling a home, be aggressive and list it potentially 5-10% below what you think you should list it for. Ensure there’s absolutely nothing a buyer would balk at–the landscaping should be perfect and the home should be staged. That can help prevent future potential price drops, and the negative perception of accruing days on market.”

Near-Record Share of Deals Are Falling Through

Redfin said more homebuyers are backing out of deals than ever before. Nationally, 14.5% of homebuying deals that went under contract in September were cancelled. That’s the highest share since the start of the pandemic. Other than March and April 2020, it’s the highest share on record, Redfin said.

The brokerage noted that contract cancellations are common because buyers are in the driver’s seat.

It’s the strongest buyer’s market on record, Redfin said.

When house hunters have lots of options, they’re more likely to back out of a deal if the inspection is problematic, their monthly payment doesn’t look as they thought it would, or they change their mind, Redfin said.

One in five (19.9%) homebuying deals in Jacksonville, Florida, was cancelled in September—the highest share among the 50 most populous U.S. metro areas. It’s followed by Tampa, Florida (18.8%), Las Vegas (18.6%), San Antonio (18.5%) and Phoenix (18.4%), all big buyer’s markets.

Redfin reported that deals are least likely to fall through in San Francisco, where just 2.8% of contracts were cancelled in September. Next are Nassau County, New York, San Jose, California, Montgomery County, Pennsylvania, and New York, all metros where less than 8% of deals were cancelled.

San Francisco, Nassau County, and Montgomery County are three of just five seller’s markets in the nation, Redfin noted.