September Was a Turning Point For Demand, With Pending Home Sales Flat After 9 Months of Declines and Tours Hitting Highest Level Since April

Pending home sales are flat from a year ago, marking the first time since January they haven’t declined; on a local level, sales are increasing in most major metros. Other demand indicators, like home tours and mortgage-rate locks, are also improving as mortgage rates drop to their lowest level in two years. 

Pending U.S. home sales were flat from a year earlier during the four weeks ending September 29, marking the first time since January pending sales didn’t decline. It’s worth noting that we’re comparing to a period last year when sales slumped as mortgage rates surged into the mid-7% range.  

Pending sales increased year over year in 27 of the 50 most populous U.S. metros, the most since January. They rose most in Phoenix, with a 13% increase, followed by San Jose (12%) and Portland, OR (10%). Homebuying demand is starting to improve in those places after dropping to a low point last year, but pending sales are still below pre-pandemic levels. (Sales are still posting big declines in Florida, where homebuyers have backed away due largely to climate disasters and rising insurance and HOA costs. Pending sales fell 18% year over year in West Palm Beach, more than anywhere else in the country, followed by 16% drops in Fort Lauderdale and Miami.)

Homebuying demand at earlier parts of the buying process is improving, too. Redfin’s Homebuyer Demand Index–a measure of tours and other buying services from Redfin agents–is up 9% month over month to its highest level since April. Homebuyers locked in more than twice as many mortgages than they did a month earlier on September 30, according to Optimal Blue data, and mortgage-purchase applications are up 10% month over month. 

Homebuyers are starting to return because housing costs are coming down. The average 30-year mortgage rate dropped to 6.08% last week, its lowest level in two years, pushing the typical homebuyer’s mortgage payment down to $2,529, near its lowest level since January. That’s a 5.9% decline, the biggest year-over-year drop since May 2020. Additionally, the Fed’s mid-September interest-rate cut caused many Americans to realize that mortgage rates have already declined about as much as they’re going to for the foreseeable future. 

Declining mortgage rates are also encouraging some homeowners to sell, though that’s not a new trend: Listings have been on the rise for nearly a year, and this week’s 4.3% increase is on par with those over the last few months. 

“There’s no doubt demand has picked up since the Fed’s interest-rate cut; I’m seeing much more traffic at my listings. But even though homes are selling, they’re still not typically getting multiple offers,” said Max Shadle, a Redfin Premier agent in Phoenix. “Falling rates are an incentive for homeowners to sell, too, because they know demand is coming back and they feel less locked in by their relatively low rate. But many people still have an ultra-low mortgage rate from a few years ago, and they’re not quite ready to let go.”

For Redfin economists’ takes on the housing market, please visit Redfin’s “From Our Economists” page. 

Leading indicators

Key housing-market data

Refer to our metrics definition page for explanations of all the metrics used in this report.