Housing Market Tilts to Buyers as Mortgage Rates Climb Past 7%

Buyers have more leverage and less money to spend

American homebuyers have more leverage than they did a few months ago, but they can afford less. That is the main finding of Realtor.com's latest quarterly Market Clock report, released Oct. 19. It moves the national reading from 3 o'clock to 4 o'clock, a position the company calls "late balanced" and loosening toward buyers.11 By the report's count, roughly two-thirds of the 99 metros it tracks now either favor buyers outright or are moving in that direction.11

The report itself comes with a warning. Mortgage rates rose 74 basis points in just over a month, from 6.66% in late August to 7.40% on Oct. 8. For a household with a $2,000 monthly principal-and-interest budget, that wipes out 7.2% of purchasing power, or more than $22,000 of home price.11 Senior economist Jake Krimmel put it plainly: leverage and purchasing power are "moving in opposite directions right now."11

The other data released this month backs up that reading. Sales are stuck, applications are falling, builders are cutting back and prices are still rising. The market looks more like a demand freeze than a buyer's market in the traditional sense.

How the clock moved

The Market Clock combines inventory, recorded transactions and contract-based sales projections into a single dial. Twelve o'clock means peak seller conditions and 6 o'clock means peak buyer conditions.15 Of the 99 metros, 27 are seller's markets, 49 are balanced and loosening, 17 are buyer's markets and six are balanced and tightening.11 Over the past year, seller's markets fell from 39 to 27 and buyer's markets rose from 13 to 17.11

The coverage mostly agrees on these figures, though outlets label the timing differently. Fox Business calls it the third-quarter report, with the clock one hour further toward buyers than in the second quarter.14 Inman measures the change in seller's and buyer's markets against the second quarter of 2025, and in one place describes the leverage gain as a second-quarter event.15 Realtor.com's methodology explains why: the clock now runs on data through September, and earlier readings were restated, so some past values differ slightly from those first published.11 Anyone comparing quarters should keep that in mind.

The regional pattern stands out. The Midwest has 16 of the country's 18 seller's markets, while the South has 14 of the 17 buyer's markets.11 Bakersfield, Colorado Springs and Riverside moved into buyer territory in the West. Austin, Seattle, Salt Lake City and Portland, Oregon, each moved two hours toward buyers, and Greenville, South Carolina, and Nashville reached the peak-buyer position.11 Florida dominates the "late buyer" group, which includes Miami, Tampa, Orlando, Cape Coral and Sarasota. Hartford, Connecticut, is the only market at peak seller.11

Eleven metros have been seller's markets in every month of the clock's history. Most are in the Midwest: Columbus, Grand Rapids, Indianapolis, Kansas City, Omaha, St. Louis and Wichita.11 Realtor.com flags Detroit, Richmond, Columbus and Indianapolis as the seller's markets closest to flipping. Atlanta, Denver, Jacksonville, Memphis and San Antonio are among the balanced markets that could become buyer's markets.1112

Prices: a record September median, with a regional split

If buyers really have the upper hand, national prices don't show it yet. The National Association of Realtors reported a median existing-home price of $417,500 in September, up 1.3% from a year earlier. That was the 39th straight month of annual gains.31 NAR chief economist Lawrence Yun said it was the highest median ever recorded for a September.33

The regional price data lines up with the Market Clock. Midwest prices rose 3.1% from a year earlier, consistent with its seller's-market status. Prices in the South barely moved, up 0.2%, and the West fell 0.3%. The Northeast rose 4.7%.31 Three of the four tightening or seller-leaning areas the clock identifies, including New York, Boston and Bridgeport-Stamford, are in the Northeast.11 Two independent methods are pointing to the same geography, which makes the regional story the most reliable part of this report.

The national price figure may also be lagging. Yun said September closings mostly reflect contracts signed in August, before the sharpest jump in rates.39 The price data therefore doesn't yet capture how buyers reacted to rates above 7%.

Sales: inventory is back, buyers are not

Existing-home sales rose 1.5% in September to an annual pace of 3.99 million but were down 2.2% from a year earlier.31 Yun played down the monthly gain, noting that August and September were the two slowest months of the year and that August had been revised down.33 Inventory rose to 1.60 million homes, a 4.8-month supply and the highest level since November 2019.33 The median home spent 33 days on the market, up from 31 in August.31

Yun summed up the market this way: "Supply is not really an issue anymore… So it's really the demand that is contracting."33 That supports the leverage side of the Market Clock argument. More listings and slower sales give buyers room to negotiate, and Yun told sellers they may need price cuts and incentives.37 But leverage that comes from weak demand is different from leverage that comes from abundant supply, and this market has mostly the first kind. NAR's affordability index fell to 105.4 from 106.7 a year earlier.33

Mortgage rates: a pause, not a turn

Freddie Mac's 30-year average reached 7.03% on Sept. 24, its first reading above 7% since January 2025, and then rose to 7.28% and 7.40%.8 The Oct. 8 reading was the highest since November 2023.8 Coverage attributes the rise to two things: a 25-basis-point Federal Reserve rate increase and a jump in 10-year Treasury yields.15 The September hike set the federal funds range at 3.75% to 4.00%.8 The 10-year yield was still around 5.1% in the week of Oct. 19.7

The first relief came on Oct. 22, when Freddie Mac's average fell to 7.32% from 7.40%. A year earlier it was 6.19%.1 Krimmel cautioned that the dip "does not put much of a dent" in the fall surge. Realtor.com also described the Fed outlook as having "firmed up considerably."20

My reading is that rates are more likely to stay in the low-to-mid 7% range into the winter than to fall back quickly. With Treasury yields above 5% and the Fed raising rates instead of cutting, there is little reason to expect a fast decline. That is an inference from the conditions described, not a published forecast.

The lock-in effect makes this worse. Realtor.com's separate outstanding-mortgage report found that higher rates are slowing the release of homeowners from low-rate loans. Economist Hannah Jones called the "rate unlock" real but slow.18

Mortgage applications: lower rates didn't bring buyers back

The Mortgage Bankers Association's weekly survey shows weak demand. Its 30-year conforming contract rate reached 7.49% in the week ending Oct. 2, and the purchase index fell 15% below the year-earlier level.41 The following week the rate hit 7.50% and purchase applications were 16% below a year earlier.49

The most telling result came in the week ending Oct. 16. The MBA's contract rate fell to 7.41%, its first decline in more than two months, yet applications dropped 5.3% and the purchase index fell 7%.44 Purchase applications were 18% behind last year's pace, which MBA's Joel Kan attributed to higher rates "pricing buyers out of the market."44 More borrowers are turning to adjustable-rate loans, which now make up about 10.5% of applications, because ARM rates are almost a full point below the 30-year fixed rate.44

Fannie Mae's purchase index also fell for the week ending Oct. 9, although its refinance index moved in the opposite direction from MBA's.46 The purchase picture is consistent across both sources.

Construction: builders pull back, except in the South

Home builders are responding to the same conditions. Housing starts fell 5.2% in September to an annual rate of 1.221 million, well short of forecasts near 1.30 million.22 Over the past 25 months, only May was lower.24 Single-family starts fell to 859,000. Starts in buildings with five or more units dropped to 349,000, 25.9% below a year earlier.24 Reported numbers vary slightly by outlet. One put the monthly drop at 5.9%.23 NAHB's multifamily figure of 362,000 uses a broader definition than the Census five-plus category.30 Census also notes that the monthly change in starts is not statistically significant.25

Permits held steady at 1.40 million, but single-family permits fell 4% to 845,000.21 Fewer single-family permits is a better signal of where builders are headed than one month of starts.

The regional starts data is surprising. Starts in the South rose 6.1% in September while the Midwest fell 19% and the West fell 23.2%.24 Builders are adding the most new supply in the region with the most buyer's markets, while the Midwest, where sellers have the most power, is building less. If that continues, the regional divide the Market Clock identified is likely to widen.

What it means

Taken together, the data shows a market where the balance of power has shifted toward buyers mainly because many buyers have dropped out. The ones still shopping, especially in the South, Florida and parts of the West, can ask for price cuts and concessions. But at 7.3% to 7.4%, those discounts are mostly offset by higher financing costs, and the record median price suggests sellers outside the weakest markets haven't conceded much yet. Realtor.com's own advice points the same way: it recommends building a budget cushion, improving credit scores and making larger down payments, steps that help with affordability rather than negotiation.15 Until rates fall meaningfully, more buyer leverage will not mean many more buyers.