October 2026 Housing Market Report: Home Sales Slow as Mortgage Rates Rise and Buyers Gain Negotiating Power

The housing market slowed sharply in September as mortgage rates climbed above 7%, pending home sales dropped, and sellers faced growing competition for a shrinking pool of buyers. Home prices have held relatively steady, but that hasn't made purchasing a home any easier. Higher borrowing costs continue to put monthly payments out of reach for many households.

The latest reports from Zillow, Redfin, the National Association of Realtors, and Orange County housing analyst Steven Thomas show that buyers have gained considerable negotiating power. More homes are sitting on the market, price reductions are becoming more common, and sellers are increasingly willing to make concessions to close a deal.

Southern California has been hit particularly hard. Pending sales fell across Los Angeles, San Diego, and Anaheim, while Orange County recorded its lowest September buyer demand since 2007. Despite the slowdown, low foreclosure activity, stronger lending standards, and substantial homeowner equity suggest the housing market is in a much different position than it was before the 2008 crash.

Orange County Housing Market: Buyer Demand Falls to Lowest September Level Since 2007

Orange County's housing market slowed considerably in September as rising mortgage rates pushed more buyers to the sidelines. According to housing analyst Steven Thomas in his September 28 report, buyer demand fell 8% in just two weeks to 1,349 pending sales, the lowest September reading since 2007. Demand was approximately 16% below the same period last year and 40% below the 2017–2019 average. Mortgage rates, which were near 6% in February, had climbed to approximately 7.5% by late September, according to Mortgage News Daily figures cited by Thomas.

There were 4,952 active listings in Orange County, an 8% increase from a year earlier. Despite that increase, inventory remained 29% below pre-pandemic averages. The bigger problem for sellers is that fewer buyers are competing for those homes. Orange County's Expected Market Time, which estimates how long it would take to sell the current inventory at the existing pace of demand, increased to 110 days, compared with 85 days a year earlier. Condominiums and townhomes faced an even slower market at 128 days, while detached homes had an expected market time of 99 days.

The luxury market has also slowed. Demand for homes priced above $2.5 million dropped 14% over two weeks, pushing the expected selling time to 184 days. Properties priced between $4 million and $6 million had an expected market time of 218 days, while homes above $6 million faced an estimated 454 days. Sellers who need to move are finding that pricing a home based on last year's market conditions is no longer a reliable strategy.

Despite the weak sales figures, Thomas does not see the conditions necessary for another housing crash. Orange County had nearly 18,000 homes on the market in 2007, compared with fewer than 5,000 today. Homeowners generally have stronger equity positions, lending standards are tighter, and distressed sales remain extremely low. Orange County recorded just 41 completed foreclosures and short sales in 2025, compared with 13,008 in 2009. Thomas believes prices could gradually decline if mortgage rates remain elevated, but the widespread forced selling and excessive inventory that drove the last housing collapse are not present in today's market.

Zillow: Pending Home Sales Fall 8.5% as Mortgage Payments Rise

Zillow's September housing report, released October 6, shows that higher mortgage rates have put another dent in homebuying activity. Newly pending sales fell 8.5% from a year earlier and 11.2% from August, while existing-home sales declined an estimated 2.5% year-over-year, according to Zillow's preliminary sales data. By the end of September, the average 30-year fixed mortgage rate had reached 7.28%, its highest level since November 2023, according to Freddie Mac.

Home prices have been relatively flat, but that hasn't made purchasing much easier. Zillow reported a typical U.S. home value of $366,913, up just 1% from September 2025 and down 0.5% from August. Meanwhile, the estimated monthly principal and interest payment on a typical home increased 6.7% over the past year to $1,922, assuming a 20% down payment. Once estimated taxes, insurance, and maintenance are included, a median-income household would need to spend approximately 34.3% of its income on housing, up from 33.7% a year earlier.

Buyers have more properties to choose from, although inventory remains below historical norms. Zillow counted 1.39 million homes for sale in September, up 2.5% from a year earlier, but still 16.1% below pre-pandemic levels. Homes took a median of 29 days to go pending, two days longer than last year, and 27.4% of listings had a price reduction. Sellers are having to compete more aggressively, but many homeowners with low fixed-rate mortgages are still choosing to stay put rather than sell and take on a much higher payment.

Newly built homes may offer an alternative for buyers who have been priced out of existing properties. Separate Zillow research found that in July 2026, new homes sold for less per square foot than existing homes in approximately one-third of major U.S. housing markets. Nationwide, the median price was $205 per square foot for newly built homes compared with $212 for existing homes. Those figures represent the homes sold in each category, rather than identical properties, but they challenge the assumption that new construction is always more expensive. Builders have been working through completed inventory, creating opportunities for buyers willing to consider a newly constructed property. Meanwhile, the rental market remains strong, with typical rents rising 2.7% annually to $1,932, the largest yearly increase since April 2025.

Redfin: Pending Sales Reach Lowest Level Since 2014 as Buyers Gain Leverage

Redfin reported that pending home sales fell to their lowest level since spring 2014 in September, excluding April 2020, when the pandemic temporarily brought much of the housing market to a halt. Pending sales dropped 4% from August on a seasonally adjusted basis, the largest monthly decline in more than three years. All 50 of the nation's largest metropolitan areas recorded annual declines in pending sales, including several Southern California markets. Los Angeles saw pending sales fall 16%, San Diego declined 15.8%, and Anaheim dropped 15.5%.

The median U.S. home-sale price increased just 1.3% year-over-year to $393,895, the smallest annual gain since February. Sellers are also accepting less than they initially hoped to receive. Approximately 60.5% of homes sold in September closed below their original asking price, continuing a trend that has lasted roughly 18 months. Nearly one in five active listings had a price cut, and the number of homes available for sale climbed to approximately 1.51 million on a seasonally adjusted basis, the highest level since March 2020.

Buyers are also walking away from transactions more frequently. Redfin found that 14.5% of home purchases that went under contract in September were canceled, the highest share outside the early pandemic period in its records. Buyers with more options are becoming less willing to overlook inspection problems, unexpected expenses, or financing terms that make a property difficult to afford. For sellers, getting an offer accepted no longer guarantees the transaction will close.

A separate Redfin report published on October 14 found that there were 62.6% more sellers than buyers nationwide in September, the largest gap in its records dating back to 2013. Redfin estimated approximately 1.51 million sellers were competing for 928,892 buyers. Of the 50 largest metropolitan areas, 41 qualified as buyer's markets under Redfin's methodology. That imbalance is giving qualified buyers more room to negotiate prices, repairs, closing costs, and mortgage-rate buydowns. But fewer competing buyers are not necessarily a sign of improving affordability. Many households remain priced out of the market, even as inventory grows.

National Association of Realtors: Existing-Home Sales Rise Slightly, but Remain Below Last Year

The National Association of Realtors reported a 1.5% increase in existing-home sales in September, bringing the seasonally adjusted annual sales rate to 3.99 million. The monthly improvement was modest, and sales remained 2.2% below September 2025 levels. NAR Chief Economist Lawrence Yun noted that August and September were the two slowest months for existing-home sales in 2026, despite the slight improvement in September.

The median existing-home price reached $417,500, an increase of 1.3% from a year earlier and the 39th consecutive month of annual price growth. Inventory climbed to 1.60 million homes, up 4.6% year-over-year, providing a 4.8-month supply at the current sales pace. Homes spent a median of 33 days on the market, compared with 31 days in August. Buyers are finding more choices and having more time to make decisions, although prices have yet to decline significantly at the national level.

Regional results show that housing conditions are far from uniform. The West recorded a 2.8% monthly increase in existing-home sales, but transactions were still down 5.2% from September 2025, the largest annual decline among the four major regions. The median sale price in the West fell 0.3% year-over-year to $613,600. The Northeast, by comparison, recorded a 4.7% annual increase in median prices, while the Midwest gained 3.1% and the South rose just 0.2%. The small price decline in the West may offer some relief, but the region remains one of the country's most expensive places to purchase a home.

First-time buyers accounted for 31% of September sales, a slight increase from 30% a year earlier. Cash buyers represented 27% of transactions, while individual investors and second-home buyers accounted for 20%, up from 15% in September 2025. Distressed sales remained at just 2% of transactions. With more inventory available and homes taking longer to sell, NAR expects sellers to pay closer attention to local conditions and consider incentives or price adjustments to attract buyers.

October 2026 Housing Market Highlights

• Mortgage rates reached 7.28% at the end of September, putting additional pressure on housing budgets and limiting buyer demand.
• Pending home sales dropped sharply. Zillow reported an 8.5% annual decline, while Redfin found that pending sales had fallen to their lowest level since spring 2014, excluding the pandemic shutdown.
• Orange County buyer demand reached its lowest September level since 2007, with the Expected Market Time increasing to 110 days.
• Home prices are barely rising. Zillow reported 1% annual home value growth, while Redfin and NAR recorded 1.3% increases in national sale prices.
• Sellers face more competition. Redfin estimates that there were 62.6% more sellers than buyers nationwide, and approximately three out of five homes sold below their original asking prices.
• Housing inventory continues to grow. NAR reported 1.60 million existing homes available nationwide, up 4.6% from last year.
• New construction may offer better value. Zillow found that newly built homes sold for less per square foot than existing properties in one-third of major markets during July.

What Buyers and Sellers Should Expect This Fall

The housing market has shifted considerably from the conditions buyers and sellers faced just a few years ago. Homes are taking longer to sell, bidding wars are less common in many markets, and sellers have less room to hold firm on asking prices. At the same time, higher mortgage rates mean that even buyers who negotiate a lower purchase price may still face a substantial monthly payment.

For buyers who have been waiting for more favorable conditions, the increase in available homes is worth paying attention to. Sellers may be more willing to negotiate on price, contribute toward closing costs, or offer a mortgage-rate buydown. New construction is also worth comparing with existing homes, particularly where builders have completed properties available and are offering financial incentives.

Sellers need to be realistic about what comparable properties are actually selling for, not simply what neighboring homes are listed for. With fewer qualified buyers actively shopping, an overpriced home can sit on the market for months and eventually require a larger price reduction than if it had been priced correctly from the beginning. Homes in good condition and priced competitively still have buyers, but sellers can no longer assume that listing a property will automatically bring multiple offers.

The current data does not point to a repeat of the 2008 housing crash. Homeowners generally have more equity, distressed sales remain limited, and inventory is still below pre-pandemic levels in markets such as Orange County. The biggest problem is affordability, and until mortgage rates or home prices come down enough to make monthly payments manageable for more households, sales activity may remain weak.

For Nuvision members considering a home purchase, the slower market provides more time to compare properties, evaluate financing options, and negotiate with sellers. The important consideration is whether the home and monthly payment fit their budget, rather than trying to predict exactly when mortgage rates or home prices might fall.