Mortgage costs jump 12.8% year over year as rates top 7%, stalling deals and driving renters to a 19-month high in annual gains
Mortgage rates entrenched above 7% dealt a sharp blow to US housing activity in October, with newly pending listings falling 16.8% year over year. That's the steepest annual drop since August 2023 and the slowest October for contract signings since 2018, according to Zillow’s October Market Report.
Completed home sales fell 8.7% year over year, with Zillow’s preliminary count recording 304,105 transactions, down 5.4% from September.
Those figures largely capture deals inked in September, when rates temporarily dipped below 7%.
October’s pending data, however, points to a significantly sharper pullback for November closings.
Surging mortgage costs reshape buyer decisions
The monthly mortgage payment on the typical US home reached an estimated $2,004 in October, assuming a 20% down payment and excluding taxes and insurance. That's up 12.8% from a year ago and 4.8% above September, the largest single-month jump in four years.
For Federal Housing Administration (FHA) borrowers putting 5% down, the year-over-year increase stood at 11.8%.
When taxes, insurance, and maintenance are added, a median-income household would spend 41.5% of its monthly income to carry the typical home, up from 39.2% a year earlier.
Mortgage rates averaged 7.33% in October, according to Freddie Mac, climbing from 6.86% in September.
Despite softening demand, the Zillow Home Value Index placed the typical US home at $364,812, just 0.7% above a year ago, suggesting sellers have not materially lowered asking prices.
The October data extends a slowdown that mortgage rates at a three-year high have driven through the second half of 2026, with pending home sales already hitting a record low in National Association of Realtors data for September.
“The acute sting of suddenly higher mortgage rates is having the unfortunate effect on the housing market that last month’s pending sales data foretold,” said Mischa Fisher, Zillow chief economist.
“November is shaping up to have an even larger contraction, but the silver lining is that next month is likely going to be the worst of it. I expect the pace of the slowdown to ease into the new year. There are deals to be had for buyers able to brave the affordability headwinds in the coming months, and the continued inventory buildup means there is a lot of upside for sales into next year if we get rate relief.”
Satyan Merchant of TransUnion says delinquency rates have been gradually increasing since 2021, with FHA lending driving much of the movement, while resilient employment and home equity continue to support homeowners. https://t.co/sIqVD6dC38
— Mortgage Professional America Magazine (@MPAMagazineUS) November 6, 2026
Brokers absorbing a frozen market
The strain is tangible at the broker level. Kevin Oto, broker owner at Green Haven Capital in Sacramento, California, wrote in Mortgage Professional America’s Broker Intel that fully qualified buyers are stalling at the finish line: “Buyers who surmount every financial hurdle present some of my hardest conversations, these days.”
In a September column published in Mortgage Professional America, Oto had captured the deeper shift in buyer psychology.
“Higher payments haven’t eliminated demand. They’ve raised the standard a property has to meet before a buyer feels comfortable acting,” he said.
As for-sale activity recedes, the rental market continues to strengthen. Zillow’s Observed Rent Index placed the typical US rent at $1,913 in October. up 2.9% year over year, the strongest annual gain in 19 months and the seventh consecutive month of increasing annual growth.
Active inventory of 1.4 million homes was 3.4% above year-ago levels.
Homes took a median of 31 days to go pending, two days longer than a year earlier, as the market’s pace continued to slow through the fall of 2026.
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