Housing activity weakened sharply in September, with pending sales, housing starts and building permits all falling as mortgage rates stayed above 7% for most of the month.
The index measures homes under contract before completed sales and declined in all four major U.S.
The figures add pressure to the Federal Reserve as it weighs interest-rate policy while inflation remains elevated. Lower rates could reduce borrowing costs and support housing demand, but further increases could push mortgage rates higher; markets expect rates to remain steady at the Fed’s next meeting before pricing in a strong chance of quarter-point increases in December and March 2027.
Lawrence Yun, chief economist of the National Association of Realtors, said mortgage costs were affecting affordability more than job and income gains, while also suggesting rates could be nearing a peak because they have already risen more than the Fed’s short-term rate increases.
Goldman Sachs economist Ronnie Walker expects affordability pressures to weigh more heavily on housing activity in 2027. More than 95% of mortgage borrowers have rates below current levels, including 65% whose rates are at least two percentage points lower, a gap that can discourage existing homeowners from moving.