Mortgage Rates Above 7% Push Pending Sales to 12-Year Low

Mortgage rates above 7% are sidelining buyers

Pending home sales fell sharply in September as the average mortgage rate reached 7.28% at the end of the month, a three-year high. Contracts declined 4% from August on a seasonally adjusted basis and 8.6% from a year earlier, according to Redfin figures reported by The Real Deal.

The number of homes going under contract was the lowest since spring 2014, apart from the market disruption in April 2020. Unlike closed-sale data, which reflects agreements made weeks earlier, pending sales offer a more immediate view of whether buyers are willing and able to move forward.

The slowdown was broad rather than confined to a few expensive cities. Pending sales declined year over year in all 50 of the country’s largest metropolitan markets, something that had not happened in three years. Seattle recorded the steepest drop at 24.4%, followed by a 16% decline in Los Angeles. West Palm Beach had the smallest decrease at 2.2%.

A smaller buyer pool changes pricing and time on market

For sellers, the practical issue is purchasing power. When mortgage rates rise, a buyer’s monthly payment increases even if the home price does not. Some households lower their maximum budget; others pause their search entirely. A listing can therefore receive less traffic without anything being wrong with the property itself.

That smaller pool affects days on market. Homes priced from older comparable sales may sit while buyers focus on listings that better fit their rate-adjusted budgets. Sellers should pay particular attention to the first two weeks after going live, when a property is newest and most likely to attract qualified shoppers. Weak showing activity during that period can be an early sign that the price is above the market buyers can finance.

September’s pricing data reinforces that shift. The national median sale price rose just 1.3% from a year earlier to $393,895, the smallest annual gain in seven months. The median asking price also declined from August. Those numbers do not mean every local market is losing value, but they do show that sellers have less room to rely on general appreciation to cover an ambitious starting price.

More than 60% of homes sold in September closed below their original asking price, while nearly 20% of active sellers reduced their asking price during the month. A strategic list price can protect a seller better than starting high and chasing the market downward. Repeated cuts add market time, advertise that prior buyers passed and may invite more aggressive negotiation.

Offer strength matters more when cancellations are elevated

Getting a contract is only the first hurdle. In September, 14.5% of pending deals were canceled. That was the highest share since the pandemic and, excluding March and April 2020, the highest level in the reported record. Closed sales also fell to their lowest point since late 2023.

Sellers should evaluate an offer based on its probability of closing, not simply its headline price. A buyer offering more money may still produce a lower expected net if the financing is stretched, the appraisal gap is unsupported or the inspection terms create an easy exit. A slightly lower offer with verified funds, solid underwriting and a realistic timeline can be the stronger transaction.

Before accepting, sellers should look for a current preapproval that reflects today’s interest rate, not an outdated estimate prepared when borrowing was cheaper. It is also worth understanding the size of the down payment, whether the buyer must sell another property, how appraisal shortfalls will be handled and which contingencies allow the buyer to cancel.

Contract timing deserves attention as well. A long financing period gives rates and buyer circumstances more time to change. That does not mean sellers should demand an impractical closing, but dates should match the buyer’s lender readiness. If a failed deal would create moving, storage or carrying-cost problems, certainty may be worth more than a marginally higher bid.

Seller net proceeds now depend on more than the sale price

Higher rates can pressure a seller’s bottom line in several ways. A longer listing period means additional mortgage payments, taxes, insurance, utilities and maintenance. Buyers may also request closing-cost credits or repairs to preserve cash for the down payment and monthly payment. Those concessions reduce net proceeds even when the recorded sale price appears close to asking.

Sellers comparing offers should calculate the net after credits, repair commitments and likely carrying costs. An offer of $400,000 with substantial concessions can leave less than a cleaner offer below that amount. The same applies to a high bid that later requires a price reduction after appraisal. The useful number is what remains at closing, adjusted for the risk and cost of getting there.

Preparation can limit avoidable bargaining. Addressing obvious defects, documenting major improvements and setting a price supported by recent nearby sales can reduce surprises during inspection and appraisal. Sellers should also build room into their plans for a longer timeline than neighbors may have experienced when rates were lower.

The national numbers point to a market where buyers have more negotiating leverage, but they do not determine the outcome for every home. Condition, price range, inventory and neighborhood demand still matter. The central lesson is straightforward: with mortgage rates above 7% and contracts at a 12-year low, sellers should compete for the buyers who can still close rather than price for the buyers who have already left the market.