Housing market shows sudden strength as buyers take advantage of falling mortgage rates
Lower mortgage rates are enticing some buyers back into the market
Last Updated: Sept. 30, 2025 at 10:41 a.m. ET
First Published: Sept. 29, 2025 at 10:07 a.m. ET
Pending home sales are an indicator of the pace of sales activity in the coming months.Photo: Saul Loeb/Agence France-Presse/Getty Images
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.
See also: A government shutdown would hurt home-buying deals just as buyers are coming off the sidelines
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.
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.
Related: Brew City is also home to Harley — and America’s hottest housing market
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.”
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About the Author
Aarthi Swaminathan is a MarketWatch personal finance reporter covering residential real estate. She is the winner of a silver award for Best Collection of Work by an Individual Covering Residential Real Estate from the National Association of Real Estate Editors.
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