Mortgage Rates Ease to 7.3% as Purchase Applications Sink 19%

Rates fell again, and demand kept falling

Mortgage rates have now fallen for three weeks in a row, and buyers have kept leaving anyway. The Mortgage Bankers Association reported that the average contract rate on a 30-year fixed conforming loan fell to 7.30% from 7.37% in the week ending October 30. Total application volume still fell 1.2% from the prior week on a seasonally adjusted basis.41 Purchase applications dropped 2% for the week and were 19% below the same week a year earlier. Refinance applications rose just 0.1% and were 60% below year-ago levels.14

Coverage across outlets agrees on these numbers and on what they mean. Bloomberg noted that even after the decline, rates are almost a full percentage point above where they were a year ago and close to their highest level since 2023.42 Quartz, citing Bloomberg, reported that the MBA purchase index has fallen in eight of the past nine weeks and is near its weakest reading since January 2025.43 MBA chief economist Mike Fratantoni put it this way: the 30-year rate came down, but activity is "still quite slow."11

The main point is that small rate cuts are not reaching buyers. A drop of seven basis points does little when rates have climbed sharply over the year. Freddie Mac's weekly survey, which runs somewhat lower than the MBA figure, put the 30-year average at 7.24% on October 29, compared with 6.17% a year earlier.50 The Hill reported that the 30-year rate began 2026 below 6.2%. Higher oil prices tied to the Iran war and a sell-off in bonds pushed borrowing costs up over the year.47

The weekly data show demand is weak, not just jumpy

The October data show a clear pattern. In the week ending October 2, the MBA's 30-year rate hit 7.49%, its highest in nearly three years, and applications fell 4.2%.13 Two weeks later the rate eased to 7.41%, the first decline in more than two months. Applications still fell 5.3%, and purchase applications dropped 7%.15 The one bounce came in the week ending October 23. Applications rose 3.4% as the rate slipped to 7.37%, but the MBA's Joel Kan noted that purchases were still 18% behind the previous year's pace.12 The latest week erased that gain.

Buyers are also shifting toward adjustable-rate mortgages. The ARM share of applications rose to 11.4%.11 Fratantoni said that is the highest share since September 2025.14 The 5/1 ARM rate fell to 6.29% from 6.41%.41 The MBA presents rising ARM use as a sign that buyers are ready to act if rates come down.11 Another reading is that people still buying are taking on future rate risk to get a lower payment now. That is usually a symptom of strained affordability, not of healthy demand.

Home sales are at historic lows

The monthly sales data back up the weekly trend. The National Association of Realtors said pending home sales fell 7.3% from August to September and 11.3% from a year earlier, with declines in all four regions.39 TheStreet reported that the index fell to 66.0, the lowest in records going back to 2001, well below January's previous low of 70.8. The 7.3% drop was far worse than the 0.5% decline economists expected.38 Wolf Richter measured the same release against data starting in 2010 and also called it a record low. He noted that contract signings were down nearly 40% from September 2019.35 The outlets use different historical baselines, but they agree that contract activity has hit a record low.

NAR chief economist Lawrence Yun blamed fast-rising mortgage rates. He said rates affect affordability more than job and income growth do, and that buyers and sellers may be waiting for better rates.40 Closed sales have held up better so far. Existing-home sales rose 1.5% in September to an annualized 3.99 million, but were down 2.2% from a year earlier.39 Yun noted that August and September were still the two slowest sales months of the year.36 Because pending sales usually lead closings by one to two months, the September contract collapse suggests weaker closings ahead.31 TheStreet added a caveat: contract cancellations are currently high, which can make pending sales less reliable as a signal.38

Redfin's more recent data show the slowdown continued into late October. In the four weeks ending October 25, pending sales fell 15.9% from a year earlier to the lowest level in Redfin's records, which go back to 2021. Pending sales fell in all 50 of the most populous metro areas for a third straight week.44

Home prices: lagging indexes show growth, recent data show a turn

Home-price measures disagree depending on how current they are. The S&P Cotality Case-Shiller national index rose 2.1% from a year earlier in August, up from 1.9% in July. Prices still fell in inflation-adjusted terms for the 15th straight month, because inflation was running at 3.4%.9 Regional gaps are wide: Chicago was up 6.7% while Seattle was down 2.0%. The FHFA index rose 2.4% year over year.9

Those indexes look backward. Case-Shiller's August figure is a three-month average of closings that partly reflect contracts signed in the spring.9 HousingWire argued that the index lags faster-moving data on inventory and rates, and that the mood changed once rates rose above 7% in September.8 Redfin's more current data show the median sale price at $389,601 for the four weeks ending October 25. That was 0.1% lower than a year earlier, the second straight week of annual declines after steady gains since 2023. Redfin described the market as having hundreds of thousands more sellers than buyers.44 NAR put September's existing-home median at $417,500, with inventory rising to 1.60 million.3334

The most likely reading is that prices are starting to fall nationally but the official indexes have not caught up. Bill McBride of CalculatedRisk reported that single-family inventory is back to 2019 levels. He expects that with 30-year rates at 7.3%, existing-home sales will slow and prices will come under pressure in the coming months.14 Yun offered a reason prices are not falling sharply: there are few distressed properties, which has kept prices steady.40 In practice that means a slow decline, not a crash.

Builders are cutting back

Homebuilding is also weakening. Housing starts fell 5.2% in September to an annualized 1.221 million, 7.4% below a year earlier. Single-family starts fell 4.6% to 859,000.23 Total building permits were nearly flat at 1.4 million. Single-family permits fell 4.0% to 845,000, which is a better guide to future construction.21 Starts in buildings with five or more units were 25.9% below a year earlier.23

The monthly starts figures come with large error bars. The Census Bureau's 90% confidence interval on the headline decline was ±11.8 percentage points, so the change cannot be statistically distinguished from zero.22 Completions were the clearer signal: they ran 14% below a year earlier, the only headline change outside the margin of error.26 Builder sentiment is clearly weak. The National Association of Home Builders' October index hit its lowest level in 14 years, and buyer traffic was its weakest component.37 New-home sales were 676,000 in September, helped by builders paying to lower buyers' mortgage rates.8 Those subsidies cut into builder margins and help explain why fewer projects are starting.

Where rates may go next

The short-term outlook for rates is mixed, and forecasters see risks on both sides. The Federal Reserve held its policy rate at 3.75% to 4% in October.48 Fratantoni linked the recent drop in mortgage rates to that decision.41 Mortgage News Daily reported that rates rose slightly early this week after a stronger-than-expected report on job openings. Its chief operating officer, Matthew Graham, said strong labor data tends to push rates up and that weakness in tech stocks had helped keep rates down.41

Politics adds another factor. Mortgage News Daily commentary argued that markets see Democrats winning control of Congress as reducing the chance of more deficit-financed tax cuts. That could keep Treasury yields, and therefore mortgage rates, lower. The same commentary warned that signs of a stronger labor market could reduce expectations for Fed rate cuts.49 Norada Real Estate expects the 30-year rate to stay in the low-7% range for now.48 Mortgage News Daily's daily index stood at 7.25% on November 4.49

Analysis: affordability is the problem, not just this week's rate

Across the coverage, buyers are reacting to a year-long jump in costs, not to week-to-week moves. Rates are about a percentage point higher than a year ago. Prices are only beginning to slip. Other costs of owning a home, including property taxes and insurance, keep rising.49 For a buyer, the drop from 7.37% to 7.30% barely changes the monthly payment.

Demand looks unlikely to recover until rates fall back toward the levels seen early in the year. NAR's October existing-home sales report on November 12 and its pending sales report on November 18 will show whether the September contract collapse is turning into fewer closings.3431 Most of the signals point that way. Sales are at record lows, purchase applications are down nearly a fifth from a year ago, and builders are starting fewer homes.