Contracts to purchase previously owned U.S. homes plunged to their lowest level on record in September as rapidly rising mortgage rates intensified affordability pressure on American households.
The National Association of Realtors Pending Home Sales Index dropped 7.3% from August to 66.0, the lowest reading since the series began in 2001.
Economists surveyed by Reuters had expected a decline of only 0.5%.
Pending sales were down 11.3% from a year earlier, with contract activity declining across all four U.S. regions.
Borrowing costs are the immediate pressure point.
The average U.S. 30-year fixed mortgage rate reached 7.40% last week, its highest level in nearly three years.
Mortgage rates have followed the rise in Treasury yields as persistent inflation and higher energy costs have forced investors to reconsider how long U.S. interest rates will remain elevated.
Housing supply is also showing signs of stress.
Separate government figures showed single-family housing starts falling 4.6% in September to an annualized rate of 859,000 units, while single-family building permits dropped 4% to 845,000, their lowest level in roughly three and a half years.
The combination is significant.
Weak pending sales show buyers retreating from the existing-home market, while declining permits and construction activity indicate builders are becoming more cautious about adding supply.
That creates a difficult adjustment mechanism.
Higher mortgage rates reduce purchasing power, but slower construction can also restrict future housing supply, limiting the extent to which additional inventory can eventually improve affordability.
For markets, housing is becoming another channel through which elevated Treasury yields are reaching the real economy.
The next signals will be existing-home closings, mortgage rates and whether Treasury yields retreat enough to bring buyers back into the market.
