Pending Home Sales Decline in October, While Deal Cancelations and Price Cuts Hit Record Highs

According to a new report from Redfin, pending home sales fell the most on record in October and deal cancellations and price cuts hit record highs.

Redfin is reporting that pending sales dropped 32.1% year-over-year in October, the largest decline since at least 2013, when Redfin’s records began. Nearly 60,000 home-purchase agreements fell through, which is equal to 17.9% of all homes that went under contract. At the same time, 23.9% of homes for sale experienced a price drop, double the rate of a year earlier.

Surging mortgage rates also caused would-be sellers to stay put due to the lock-in effect. The average 30-year fixed-rate mortgage was 6.9% in October, up 3.83 percentage points from 3.07% one year earlier—the largest year-over-year increase during any month since 1981. That contributed to a 24% year-over-year drop in new listings—the steepest decrease on record aside from April 2020, when the onset of the pandemic brought the housing market to a near halt.

Adding additional background and her analysis, Redfin’s Economics Research Lead Chen Zhao said:

“The Fed’s actions to curb inflation are causing the housing market to slow at a pace not seen since the financial crisis. There are already early but promising signs that inflation is cooling, which caused mortgage rates to drop last week. If that progress continues, buyers who recently backed out of deals may return to the market and sellers may be less inclined to slash their prices.”