The U.S. housing market suffered a major setback in September as rapidly rising mortgage rates pushed prospective buyers to the sidelines.
This could add yet another affordability headache for President Donald Trump and Republicans just weeks before the midterm elections.
Pending home sales, which measure signed contracts to purchase existing homes, plunged 7.3 percent from August and 11.3 percent from a year earlier in September, according to National Association of Realtors data released Tuesday.
The decline coincided with a sharp increase in mortgage rates, which began September around 6.8 percent and reached 7.6 percent by the end of the month, according to Mortgage News Daily.
“Higher rates will definitely slow the housing market, and force those with much lower rates to stay put. The housing market will be at a standstill for some time to come,” Kevin Thompson, CEO of 9i Capital Group and host of the 9innings podcast, told Newsweek.
Why It Matters
Affordability has become one of the defining issues of the November 3 midterm elections.
Housing costs are particularly important to younger voters, and the economy more generally has been considered one of the most essential issues for registered voters.
When it comes to housing, higher mortgage rates can quickly change what a household can afford even if home prices don't rise.
Existing home prices also reached a median $417,500 in September, 1.3 percent higher than a year earlier and the highest recorded September price, according to National Association of Realtors data.
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What To Know
Trump campaigned in 2024 on lowering household expenses, including borrowing costs, and the president pledged during his campaign to deliver mortgage rates as low as 2 percent.
Those rates haven't materialized and have actually gone in the opposite direction.
Freddie Mac's average 30-year mortgage reached 7.40 percent in the week ending October 8, its highest level since November 2023.
“This is not good for the party in power as borrowing costs are much higher today and costs continue to increase across the board,” Thompson said. “Affordability is the name of the game, and if it continues to get worse you will see an even heavier decline in regard to approval ratings for the president and those who push his agenda.”
Homebuilder sentiment has also reflected a negative outlook. The National Association of Home Builders' (NAHB) October reading fell to its lowest in 14 years, with current sales, expected sales and buyer traffic all declining
“Housing remains squeezed by supply-side constraints and significant affordability challenges,” Robert Dietz, NAHB’s chief economist, said in a statement. “Demand persists, but higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines.”
Home Sales Were Already Near Historic Lows
Completed existing-home sales actually increased 1.5 percent in September, reaching a seasonally adjusted annual rate of 3.99 million. However, sales were still 2.2 percent lower than a year earlier, and both August and September represented the slowest monthly sales rates of 2026.
Housing inventory, meanwhile, increased 1.9 percent to 1.60 million homes, marking the highest inventory level since November 2019.
That's one reason economists aren't primarily blaming the weak housing market on a shortage of listings.
"All of these factors are negatively impacting rates, and the results are some of the highest borrowing interest amounts many home buyers have seen in nearly two decades," Alex Beene, financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
"Unfortunately, there seems to be little that will change this any time soon. Inflationary pressures continue to impact virtually every aspect of the economy, and until those start to ease, expect to see rates linger around the 7 percent range or higher."
Sellers Are Cutting Prices
There are some indicators that buyers are gaining some negotiating power despite the broader affordability problem.
Realtor.com found 20.8 percent of listings had a price reduction in September, up 0.9 percentage points from a year earlier. That was the highest share for any month since October 2022 and the highest September reading since 2018.
Active listings simultaneously increased 5.5 percent from September 2025 to more than 1.16 million homes.
Housing Affordability Looms Over Midterm Elections
Americans will vote in the midterms on November 3, and for many, affordability is at the center of the campaign choice.
A Pew Research Center survey of 5,062 U.S. adults, including 3,917 registered voters, conducted September 28 to October 4 found 84 percent of registered voters considered the economy very important to their vote. That included 82 percent of Republican supporters and 88 percent of Democratic supporters.
Housing itself has become particularly potent among younger voters.
A CNBC All-America Economic Survey conducted in July found housing was the top political issue among voters ages 18 to 34, ranking above food costs and protecting democracy for that group. Across all registered voters surveyed, 24 percent selected housing costs as one of their top one or two issues.
Why Are Mortgage Rates Rising?
Mortgage rates do not move directly with the Federal Reserve's benchmark interest rate and are mostly influenced by longer-term borrowing costs in the bond market.
"For many Americans, there has been a long-held confusion on exactly why mortgage rates go up or down, and most of this is from the mistaken belief those moves all come from the Federal Reserve determining how many points to lower or increase interest rates," Beene said. "The reality is far more complex, as the bond market, geopolitical turmoil, and fluctuating monetary policy can all weigh on how high or low mortgage rates go."
Reuters reported that the average 30-year mortgage rate reached 7.40 percent in early October as inflation continues to climb. Specifically, September's Consumer Price Index rose 3.7 percent from a year earlier.
What Happens Next
Experts say the housing market could weaken further because the latest completed sales figures don't fully capture October's higher mortgage rates.
Unless mortgage rates come down or home prices fall substantially, monthly payments will remain beyond reach for many potential homeowners.
For Trump and congressional Republicans, the timing could matter significantly.
Newsweek’s reporters and editors used Martyn, our AI assistant, to produce this story. Learn more about Martyn here. Contact Newsweek editors on this story: Jason Lemon and Edward T. Cummins