U.S. Housing Contracts Fall 7.3% While Completed Sales Rise

U.S. home purchase contracts fell in September even as completed sales rose, giving the Federal Reserve a weaker reading on housing demand before its next meeting amid elevated inflation and borrowing costs.

Pending sales, which track contracts signed for existing homes, dropped 7.3% from August and 11.3% from a year earlier. All four U.S. regions recorded monthly declines, led by a 9.2% drop in the West.

The fall in September contract signings contrasted with a 1.5% monthly rise in completed existing-home sales. Contracts typically precede closings by one or two months. The September figures therefore describe different stages of a home purchase: pending sales count signed contracts, while completed sales count closed transactions.

Borrowing costs increased over the period. The average 30-year fixed mortgage rate stood at 7.40% on Thursday, Oct. 15, compared with 6.95% on Sept. 17. October’s builder-confidence reading of 29 was three points lower than September’s and the lowest since June 2012.

“Given that mortgage rates have already risen much more than the Federal Reserve’s short-term interest rate hikes, mortgage rates could be topping out,” said National Association of Realtors Chief Economist Lawrence Yun.

Construction figures were mixed. The annualized pace of housing starts was 1.221 million in September, 5.2% below August’s revised 1.288 million. The estimate’s 11.8 percentage-point margin of error means the reported monthly decline was not statistically significant.

Building permits slipped 0.2% to an annual rate of 1.400 million units. Within that total, permits for single-family homes fell 4.0% to an annual rate of 845,000. Permits measure activity before construction begins, while housing starts measure a later stage.

The Fed raised its target rate range by a quarter percentage point to 3.75%–4.00% in September. Consumer prices rose 0.6% that month from August and 3.7% from a year earlier. Most participants at the September Fed meeting expected another rate increase by year-end, leaving housing and inflation in focus for markets including crypto.

The Fed’s next scheduled meeting is Tuesday and Wednesday, Oct. 27-28.