Navigating Today's Mortgage Market: Pending Sales Inch Up, But Builders Face Headwinds

As an expert mortgage and real estate blogger for CMRE, I'm here to unpack the latest trends shaping the housing market. The recent data paints a picture of resilience mixed with significant challenges, influenced heavily by elevated mortgage rates and persistent supply-side issues.

Pending Sales See a Modest Rebound, Regionally Divergent

Hope for increased activity emerged in August as pending home sales edged up 0.3% from July. This slight national uptick, however, masks considerable regional differences. While the South saw a 2.3% increase and the West a 3.0% rise, the Northeast and Midwest experienced declines of 4.2% and 1.6% respectively. Annually, pending sales remain 4.7% lower than a year ago, with the West experiencing the steepest annual decline at 6.7%.

NAR Chief Economist Lawrence Yun notes that while income growth is outpacing home price growth, higher borrowing costs are still limiting buying power and overall housing demand. Activity remains roughly 30% below pre-pandemic levels nationally, signaling that lower mortgage rates are crucial to bringing sidelined buyers back into the market. This highlights the ongoing tug-of-war between buyer affordability and available inventory.

Mixed Signals in Residential Construction

The construction sector offers a complex view, with August data showing uneven progress. Single-family housing starts provided a glimmer of positivity, increasing 7.6% to a seasonally adjusted annual rate of 918,000. This recovery follows a dip in July, suggesting builders are still keen on meeting demand for single-family homes.

However, the broader picture for residential construction was less sanguine. Overall privately owned housing starts fell 2.6% to 1.275 million (SAAR) from July, and were down 1.2% from August 2025. Building permits, a forward-looking indicator, also declined 2.7% from July to an annual rate of 1.394 million, though they remained 3.5% above the August 2025 rate. Multi-family starts and completions saw more pronounced pullbacks, with overall housing completions falling sharply by 11.9% to 1.128 million (SAAR), and a substantial 27.1% decrease from a year earlier.

Builder Confidence Plummets to Three-Year Lows

Perhaps the most concerning indicator comes from builder sentiment. The NAHB/Wells Fargo Housing Market Index (HMI) for September fell three points to 32, matching September 2025 as the lowest level in over three years. This decline reflects a confluence of factors: elevated mortgage rates, rising construction costs, and worsening labor shortages.

NAHB Chairman Bill Owens emphasized that weakened buyer traffic due to rising mortgage rates is a primary concern, alongside ongoing challenges with material costs, gas/diesel prices, and labor availability. Builders are also struggling to find available lots, with a significant 42% rating current lot availability as poor. In response to these pressures and softening demand, builders are increasingly resorting to incentives. The share reporting price cuts rose to 38% in September from 35% in August, with the average price reduction holding at 6%. Furthermore, 66% of builders reported using sales incentives, up from 63% in August, marking the highest share since December.

What Does This Mean for You?

For potential homebuyers, the market remains challenging but offers some nuanced opportunities. While borrowing costs are high, the increase in builder incentives and the slight rebound in pending sales (particularly in some regions) suggest that determined buyers might find more favorable conditions than previously. For sellers, understanding regional dynamics and being prepared for longer market times and potential negotiation is key. The mixed signals underscore the importance of working with knowledgeable real estate and mortgage professionals who can help you navigate these complex currents. At CMRE, we're dedicated to keeping you informed and empowered.