U.S. pending home sales fall 7.3%, contract index hits record low
Key Facts
U.S. pending home sales fell 7.3% month on month in September 2026, according to a reading published by Investing.com on October 20, with the contract index dropping to its lowest level on record. Reuters reported that the index stood at 66.0 points, the lowest since the series began in 2001. Economists polled by the agency had expected contracts to decline 0.5% during the month, less than the actual drop. The decline followed a monthly increase of 0.3% in August, according to Investing.com, marking a downturn in contracting activity in September. The report measures the change in the number of homes under sales contracts that are still awaiting completion of the transactions, excluding new construction. These contracts serve as a leading indicator of completed sales, as they typically turn into final sales after a month or two, according to Reuters.
On the financing side, the average 30-year fixed mortgage rate stood at 7.40% in Freddie Mac's survey dated October 15. The average had been 7.03% in the institution's September 24 survey, during the month when purchase contracts declined. The mortgage rate thus rose between the late-September and mid-October readings, as the housing market moved from a month of weak contracts into the following month. The average 30-year financing rate remained above 7% on both dates cited in Freddie Mac's survey. The rise in the average extended into October, while September's contracts were still within the usual interval between the signing of a purchase agreement and completion of the sale.
In new construction, total housing starts reached a seasonally adjusted annual rate of 1,221,000 units in September, down 5.2% month on month, according to the U.S. Census Bureau and the Department of Housing and Urban Development. The EL7 economic calendar recorded an actual reading of 1.221 million units in the October 20 release. The reading was below a forecast of 1.3 million units and the previous reading of 1.288 million units, according to the calendar. Within the total, single-family housing starts fell 4.6% to a seasonally adjusted annual rate of 859,000 units, according to the National Association of Home Builders. The association said in its statement that "single-family housing starts fell 4.6%," a decline that extended to this segment of residential construction. Building permits reached a seasonally adjusted annual rate of 1,400,000 units in September, according to the Census Bureau and the housing department. In the same month, housing completions totaled 1,192,000 units on the same basis.
The weakness extended to builder confidence in October, as the National Association of Home Builders index fell 3 points to 29 points, according to the association's statement. That brought the index to its lowest reading since June 2012, a historical comparison reflecting the level of confidence recorded during the month. October's decline followed the drop in housing starts in September, adding a more recent reading on builders' conditions after the construction activity figures. The decline in confidence also coincided with the rise in the average 30-year fixed mortgage rate in Freddie Mac's mid-October survey. While the housing starts figures cover September, the confidence reading covers October, when builders continued to use price cuts and sales incentives, according to the association.
Detailing sales practices during October, the National Association of Home Builders said 43% of builders cut their prices. The average price reduction was 6%, according to the same statement, as the confidence index registered its low reading. Also, 65% of builders reported using sales incentives during the month, exceeding the share that cut prices. The reported sales tools thus included price cuts and incentives, in a market that saw the average mortgage financing rate rise between late September and mid-October. These practices are used by builders in the new-home sector, while the pending home sales index excludes new construction from the contracts it measures.
The next releases begin with the average 30-year fixed mortgage rate reading, scheduled for October 22, 2026, according to the Federal Reserve Bank of St. Louis series calendar. That reading follows Freddie Mac's survey, which recorded an average of 7.40% on October 15. The U.S. Census Bureau will then release September new-home sales data on October 27, 2026, according to its release calendar. That release covers sales of new construction, which the pending contracts report excludes from its measure. The next residential construction report, which includes housing starts, building permits and completions, is scheduled for November 18, 2026, according to the Census Bureau and the housing department.