The U.S. housing market is experiencing a notable shift as elevated mortgage rates continue to dampen buyer activity, despite an increase in both home listings and price reductions, according to Realtor.com's latest monthly housing report [1]. In September, 20.8% of active listings had a price reduction, marking the highest share for the month of September on record and representing a 0.9 percentage point increase from the previous year [1]. Active inventory rose by 5.4% year-over-year to more than 1.161 million homes, narrowing the gap with pre-pandemic inventory levels to 9.1%—the first time this gap has fallen below 10% during the current recovery [1].
Mortgage rates have surged nearly 40 basis points over the past four weeks and are now more than a full percentage point higher since the Iran War began in late February, according to Jake Krimmel, senior economist at Realtor.com [1]. Compared to last year, rates are now over 70 basis points higher, a gap that has widened quickly due to falling rates last September and rising rates this year [1]. These higher rates are prompting sellers to lower prices in an effort to attract buyers, but affordability remains a significant barrier [1].
The market's response to these dynamics is evident: the number of homes under contract is down 4.1% year-over-year, indicating a pullback in buyer activity compared to a somewhat stronger fall season last year [1]. Despite the challenging environment, home delistings remained steady, with under 6% of listings nationally being pulled from the market in September, mirroring last year's figure and showing no evidence of a late-summer or early-fall delisting spike [1].
The median listing price declined 1.2% on a monthly basis in September and 1.4% from a year ago to $419,250 nationally, though this figure remains 34.2% higher than in September 2019 [1]. The median list price per square foot was $223, down 0.6% from the previous month and 1.7% year-over-year, but up 48.1% compared to September 2019 [1]. Looking ahead, Krimmel noted that October will be a critical period to observe how sellers adapt to even tougher market conditions, particularly as leverage typically shifts toward buyers during this time of year. However, unexpectedly higher mortgage rates are resulting in even fewer buyers than usual this fall, raising questions about the depth of future price cuts and whether multiple reductions will be necessary to stimulate demand [1].
CONCLUSION
The U.S. housing market is facing significant headwinds as rising mortgage rates suppress buyer demand, leading to record-high price cuts and increased inventory. While sellers are adjusting prices to attract buyers, affordability challenges persist, and market participants are closely watching how these trends evolve into October. The overall market sentiment remains negative, with high impact expected as both buyers and sellers navigate these challenging conditions.