Zillow: Pending Home Sales Fall 8.5% as Mortgage Rates Push Housing Market Into an ‘Early Winter’

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America’s housing market lost momentum before the calendar reached winter. Newly pending home sales fell 8.5% from a year earlier in September as mortgage rates climbed to their highest level since late 2023, according to Zillow’s September Market Report.

The pullback is important because pending contracts are a forward-looking measure. Zillow’s preliminary estimate puts September existing-home closings at 319,346, down 2.5% from a year earlier and 5.6% from August. Newly pending sales were down 11.2% in a single month.

At the same time, the rental side of the housing market moved in the opposite direction. The typical U.S. rent reached $1,932, up 2.7% from a year earlier — the strongest annual increase since April 2025, according to the Zillow Observed Rent Index.

Higher rates overwhelmed nearly flat home prices

The September market did not deteriorate because home prices suddenly surged. Zillow’s Home Value Index puts the typical U.S. home at $366,913, only 1% higher than a year ago and down 0.5% from August.

Financing costs did the damage. The Freddie Mac Primary Mortgage Market Survey ended September with the 30-year fixed mortgage rate at 7.28%, its highest reading since November 2023. Zillow calculates that the monthly principal-and-interest payment on a typical home is now $1,922 with 20% down, excluding taxes and insurance — 6.7% more than a year ago.

That gap between modest price appreciation and a much larger payment increase illustrates the market’s central affordability problem. A buyer can face a materially higher monthly obligation even when the home itself has barely appreciated.

Inventory is higher, but not enough to unlock sales

There were 1.39 million homes for sale nationwide in September. Active inventory was 2.5% above last year, marking the 34th consecutive month of annual inventory growth, Zillow said. New listings rose 0.4% from September 2025.

Yet new listings remained 11.9% below Zillow’s pre-pandemic baseline. More importantly, the additional supply did not translate into stronger transaction volume because borrowing costs were keeping buyers on the sidelines.

The September data reinforce the split that has emerged across recent housing reports. WRE News reported as mortgage rates moved to their highest levels since 2023, while other market measures have shown sellers becoming more willing to cut prices as homes take longer to move.

Zillow Chief Economist Mischa Fisher said the for-sale slowdown was predictable given current mortgage rates, but called the rental market’s continued strength more surprising. He said marginal buyers are increasingly finding the monthly savings from renting difficult to ignore even when homeownership remains their long-term goal.

Rent growth is the other side of the slowdown

The acceleration in rent growth matters beyond landlords and tenants. If would-be buyers remain renters for longer, demand can shift from the ownership market into rentals at the same time that high financing costs make new apartment development harder to justify.

That dynamic echoes a separate housing-supply warning WRE News reported Monday: prolonged high rates can suppress construction, tighten future rental supply and potentially add pressure to shelter inflation.

Zillow is not forecasting an immediate rebound. Fisher said the company expects sales to remain below year-earlier levels through the fourth quarter. The open question is whether mortgage rates retreat quickly enough to pull buyers and sellers back into the market before the traditional spring season.

The next Zillow market report is scheduled for Nov. 5. Until then, September leaves a clear picture: inventory is slowly rebuilding and home-value growth is modest, but neither has been enough to offset the renewed mortgage-rate shock. The result is fewer contracts on the ownership side and stronger rent growth on the other.