Mortgage rates are a little better today, but it might not be worth celebrating.
The reason isn’t great, as it typically isn’t.
This time it’s pending home sales, which just hit a fresh record low going all the way back to 2001.
That pushed bond yields lower on the day, which will translate to slightly lower mortgage rates as well.
In other words, the soft housing market is somewhat ironically leading to lower mortgage rates, which is arguably soft to begin with because mortgage rates are so high.
Pending Home Sales Just Hit a New Record Low
Pending home sales, which are contract signings on existing homes that haven’t closed yet, fell 7.3% in September to their lowest level on record per the National Association of Realtors (NAR).
The data goes back 25 years to 2001 so this is the worst sales environment we’ve seen this century.
Home sales were only forecast to fall about 0.4% on the month, meaning the report was much, much worse than expected.
They were also down 11.3% from a year ago, which makes sense because back then mortgage rates were more than a full percentage point lower.
As expected, the folks at NAR blamed the quick run-up in mortgage rates, and it’s hard to argue with them this time.
A year ago, the 30-year fixed was averaging around 6.25%. Now it’s closer to 7.50%.
Affordability was already bad before rates rose, and this latest move might be the straw that broke the camel’s back.
Is Bad Housing News Good News for Mortgage Rates?
Strangely, it can be, at least for today.
Like other weak economic data, cooler-than-expected housing data can help push mortgage rates lower.
Though it’s important to point out that this doesn’t exist in a vacuum, nor is the movement sizable by any stretch.
Ultimately, bond yields are only a few ticks lower today, so mortgage rates might just fall a few basis points as well.
Weak economic data helps take pressure off bond yields because it means inflation concerns ease, which are an enemy of bonds.
If you get enough weak data, it makes the Fed less likely to keep hiking, which can also help bond yields move lower (or at least not keep going up!).
And as we all know, when bond yields go down, mortgage rates usually follow.
The 10-year yield is currently down about 3 basis points to roughly 5.10%, thanks to both pending home sales and a weaker-than-expected September housing starts report.
It’s not massive, but it does ease the pressure and ensure rates don’t start rising again after enjoying a nice, lower week thanks to the AI-selloff.
[Compare mortgage rates and monthly payments side by side with my mortgage rate calculator.]
Not a Great Way to Achieve Lower Mortgage Rates
Unfortunately, mortgage rates tend to like “bad news.”
It’s why they drop when unemployment rises, or jobless claims increase, or in today’s case, when housing activity sputters.
But if you want mortgage rates to go down, a collapsing housing market probably isn’t how you want to get there.
At least if you’re a lender, real estate agent, home seller, or another industry participant.
Conversely, those looking to buy a home might be winning twice here.
Fewer buyers could mean sellers will likely need to get a little more flexible on price, which would be a double benefit.
A lower mortgage rate and a lower sales price.
But with rates already hovering at near-term highs, it’s probably awash for a lot of would-be buyers.
And sellers might have little interest listing their properties in the current sales environment, which reduces supply and keeps pressure on prices.
So it’s not a massive win for anybody really, but it is yet another way to keep mortgage rates from going any higher, for now.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 20 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.
