US Home Sales Falter as Mortgages Bite

America’s housing market is losing buyers at the point where interest becomes commitment. Pending home sales fell 7.3% in September from August and 11.3% from a year earlier, according to the National Association of Realtors. The October 20 release points to a thinner pipeline of transactions as rising mortgage costs squeeze purchasing power, even while limited distressed selling helps support prices.

Every major region recorded monthly and annual declines. The West suffered the sharpest monthly fall, at 9.2%, followed by the South at 8.2%, the Midwest at 6.5% and the Northeast at 4.2%. NAR chief economist Lawrence Yun attributed the deterioration to rapidly rising mortgage rates, arguing that borrowing costs were outweighing the support offered by employment and income growth. His suggestion that rates could be approaching a peak came with a caveat: energy prices and inflation remained uncertain.

For households, the constraint is the monthly bill. A $300,000 mortgage over 30 years costs about $1,799 a month in principal and interest at 6%, compared with $1,996 at 7%. That additional $197 arrives without any increase in the purchase price. These are illustrative rates, not current market quotations, and exclude taxes and insurance. The calculation helps explain why a home can become harder to afford even when its asking price stays unchanged. Buyers working within a fixed budget must then reduce their borrowing, contribute more upfront or reconsider the purchase altogether.

Pending sales measure signed contracts for existing homes, with completion usually following within one or two months. September’s retreat therefore signals weaker activity ahead, rather than an equivalent decline in completed transactions or property values. Yun said scarce distressed stock was keeping prices steady, while buyers and sellers might be waiting for more favourable financing. For sellers, the challenge is reaching buyers whose budgets can still support a deal.