Zillow's September report shows affordability pressures worsened as mortgage rates hit 7.28%, driving more buyers toward rentals
September delivered the US housing market's sharpest rate-driven setback in nearly three years. Mortgage rates hit 7.28% at month-end, their highest since November 2023, according to Freddie Mac – and newly pending home sales fell 8.5% year over year, per Zillow's September Market Report.
Closed existing home sales declined 2.5% from a year earlier, with Zillow's preliminary nowcast counting 319,346 transactions nationwide.
Affordability math turns against buyers
The Zillow Home Value Index puts the typical US property at $366,913, up just 1% from a year ago. Yet elevated mortgage rates have pushed monthly ownership costs far higher.
A buyer putting 20% down on that home now faces a monthly payment of $1,922, 6.7% more than twelve months earlier, before taxes and insurance.
At median household income, that payment consumes 34.3% of gross earnings, up from 33.7% the prior year.
Supply is no longer the constraint. Total for-sale inventory was 2.5% higher than September 2025, extending annual gains to 34 consecutive months, though new listings remained 11.9% below the pre-pandemic baseline.
Homes sat on the market a median of 29 days before going under contract, two days longer than a year earlier, and 27.4% of listings carried price reductions, up from 26.2% twelve months before.
A new analysis from Zillow found that newly built homes are selling for a lower median price per square foot than existing homes nationwide, driven largely by increased inventory and builder incentives in key Sun Belt markets. https://t.co/p9BiScqJaw
— Mortgage Professional America Magazine (@MPAMagazineUS) September 30, 2026
Rental market steps in as buyers retreat
The clearest evidence that sidelined purchase demand hasn't evaporated – only rerouted – is rent. The typical US rent rose 2.7% year over year in September to $1,932, the largest annual gain since April 2025.
Annual rent growth has accelerated every month since April and is running across both multifamily and single-family segments.
Mischa Fisher, chief economist at Zillow in Seattle, Washington, attributed the two-market divergence to straightforward economics.
"Buyers on the margins are finding the monthly savings for renting too good to pass up, even if their long-run goal is still to purchase a home," Fisher said.
He projects sales will remain below last year's levels through Q4 2026, though rates could fall as sharply as they climbed.
For brokers managing pipelines squeezed by rate volatility, forecasters who outlined a 2026 housing market reset as buyers gained leverage are now watching whether Q4 brings enough of a rate shift to prevent the market from stalling entirely into spring 2027.
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