MW Housing market shows sudden strength as buyers take advantage of falling mortgage rates

By Aarthi Swaminathan

Lower mortgage rates are enticing some buyers get back into the market

Pending home sales are an indicator of the pace of sales activity in the coming months.

Pending home sales jumped in August to a five-month high as some buyers returned to the market on the back of a big drop in mortgage rates.

Contract signings in the U.S. rose 4% in August from the previous month, according to a monthly index released Monday by the National Association of Realtors.

Pending home sales rose to the highest level since March 2025. Sales are also up 3.8% from the same month a year ago.

Pending home sales reflect transactions where the contract has been signed for an the sale of an existing home, but the sale has not yet closed. Economists view it as an indicator for the direction of existing-home sales in subsequent months.

The pace of pending home sales exceeded expectations on Wall Street. The median forecast was for a flat reading in August, based on a survey of economists conducted by Dow Jones Newswires and the Wall Street Journal.

The 30-year fixed-rate mortgage had begun a steep decline at the start of August, culminating in a recent low of 6.13% on Sept. 16, prior to the Federal Reserve's 25-basis-point rate cut.

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In response to falling mortgage rates, the NAR data indicate that home-buying demand went up.

"Lower mortgage rates are enabling more homebuyers to go under contract," Lawrence Yun, chief economist at the NAR, said in a statement.

He also noted that home sales were more brisk in the Midwest than in other regions. In August, pending home sales in the Midwest were up 8.7% from the previous month, the highest among all regions.

"In the Midwest, low mortgage rates combined with high levels of affordability are attracting more buyers compared to other regions," Yun said.

MarketWatch has previously reported on the strong pace of sales in the Midwest.

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The national housing market is still largely in the doldrums, however, and is not seeing a prospect of a strong, persistent revival.

Buyers are still largely holding off on purchasing homes for reasons that include high home prices and an uncertain job market, along with what's known as the lock-in effect, which keeps homeowners with low interest rates on their current mortgage from moving.

"It's natural that buyers want to feel confident in their decision to purchase a home, and right now many don't," Josh Felder, a San Francisco-based real-estate agent with Redfin, said in a blog post.

The brokerage released a report noting that its pending home sales reading as of September showed weak demand.

"A lot of buyers are hesitating because they're worried about potentially losing their jobs, losing money in their stock portfolio, and the economy in general," Felder said.

And just because a buyer signs a contract on a house doesn't mean they will end up owning it, he noted. "Many of the buyers who are moving forward are making offers with contingencies, and are willing to walk away during the inspection period if they don't get the concessions they want."

-Aarthi Swaminathan

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September 29, 2025 10:07 ET (14:07 GMT)

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