Pending home sales fell 4% in September, approaching a 12-year low.
Inventory increased as buyers pulled back, while nearly one in five sellers cut prices.
Higher borrowing costs are limiting what buyers can afford, even when they have more negotiating power.
U.S. pending home sales reached their lowest level since spring 2014, excluding April 2020’s pandemic shutdown, according to Redfin. September’s seasonally adjusted monthly decline was the largest in more than three years.
“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.
The financial impact is substantial. As an illustration, a $300,000 mortgage financed for 30 years at 7.28% carries a monthly principal-and-interest payment of about $2,053. At a hypothetical 6% rate, the same loan would cost about $1,799—a difference of approximately $254 a month, excluding taxes and insurance.
Lower prices aren’t moving the needle
That calculation helps explain why a lower asking price may provide less relief than buyers expect: financing costs can absorb part of the savings.
Pending sales declined annually across all 50 major metros studied. Seattle’s 24.4% drop led the declines, followed by Los Angeles at 16% and San Diego at 15.8%.
National inventory rose 1.2% monthly to its highest level since March 2020; new listings increased just 0.3%.
Prices also weakened: 19.8% of active sellers reduced asking prices, and 60.5% of completed sales closed below the original asking price. Nevertheless, the median sale price rose 1.3% annually to $393,895.
Canceled contracts
Meanwhile, 14.5% of September purchase contracts were canceled, exceeded only by March and April 2020. Jacksonville’s cancellation rate reached 19.9%, compared with 2.8% in San Francisco.
For consumers, negotiating a purchase price and choosing financing are separate decisions that both affect affordability. The Consumer Financial Protection Bureau encourages buyers to establish their budget, explore loan choices and obtain official offers from lenders to compare their options. Its homebuying resources include explanations of Loan Estimates and Closing Disclosures.