Domestic mortgage rates have soared to their highest level in nearly three years, causing the housing market to freeze once again. As consumers looking to buy homes postpone their purchases due to heavy interest burdens, home sales are declining while rental demand is seeing a notable increase.
According to a recent September housing market report released by Zillow, existing home sales decreased by 2.5% compared to the same month last year. New pending sales, a leading indicator of future housing transactions, plunged by 8.5%. By the end of September, mortgage rates hit 7.28%, marking the highest level since November 2023.
High interest rates are driving up homebuyer financial burdens faster than home price appreciation. While the typical U.S. home price rose just 1% year-over-year to $366,913, the monthly mortgage payment—assuming a 20% down payment—jumped 6.7% to $1,922, excluding taxes and insurance.
Housing inventory is also on the rise. In September, nationwide active listings reached 1.39 million units, a 2.5% increase from the previous year, extending a streak of 34 consecutive months of growth. Despite this, high financing costs are preventing these listings from translating into actual transactions. Median-income households attempting to buy a typical home must spend 34.3% of their income on mortgages, taxes, insurance, and maintenance.
As consumers who postponed home purchases remain in the rental market, rents are also climbing. The national average rent rose 2.7% to $1,932, marking the highest annual growth rate since April 2025.
In Los Angeles, home prices rose 1.3% year-over-year to $952,830, but home sales dropped by 5.2%. Meanwhile, rent in LA increased by 1.8% to $2,929.
