Housing contract signings dropped steeply in September as rapidly rising mortgage rates spooked would-be buyers.
Pending home sales, a measure of homes going under contract, fell 7.3% in September from a month earlier and 11.3% from a year ago, hitting their lowest levels since at least 2001, according to National Association of Realtors data released on Tuesday.
Mortgage rates rocketed from around 6.7% to near 7.5% over the course of September, further slowing an already-sluggish housing market.
Economists had been bracing for slower contract activity last month, but the decline was far steeper than the 0.5% month-over-month drop and the 3.9% annual decline they had forecast.
“Market conditions weakened in September due to fast-rising mortgage rates,” NAR chief economist Lawrence Yun said in a statement. “Although job growth and income gains can support home purchases, housing affordability is more affected by changes in mortgage rates.”
No part of the country was immune to the drop, but the smallest annual declines in pending home sales occurred in both the weakest and strongest housing markets. Buyer-friendly markets like Nashville and Austin saw pending home sales drop 2% and 5.9%, respectively.
In ultracompetitive Hartford, Conn., pending sales were down 2.1%, followed by a 3.5% decline in San Francisco and a 4.6% drop in San Jose, Calif.
Pending home sales declined the most in Virginia Beach, Va., with a nearly 20% drop. In Louisville, Ky., they fell 15.8%, followed by Denver’s 15.5% decline.
Homes typically go under contract a month or two before they’re sold, making pending home sales an early indicator of future sales activity.
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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