U.S. Existing Home Sales Stall Near 4 Million as Rates Hit 7.4%

The war between the U.S. and Iran has delivered a severe secondary shock to American real estate, pushing mortgage rates to their highest levels in nearly three years and trapping the housing market in its deepest prolonged slump since the early 1990s.

Borrowing costs on the benchmark 30-year fixed-rate mortgage surged to 7.4% last week, according to Freddie Mac data, erasing the brief window of relief buyers experienced earlier this year when rates dipped below 6% prior to the late February outbreak of hostilities. The spike traces directly to surging global oil prices, which have stoked inflation expectations and driven up the long-term Treasury yields that lenders use to price home loans.

That rate shock is keeping transactions frozen near historic lows. Previously occupied homes sold at a seasonally adjusted annual pace of 3.99 million units in September, the National Association of Realtors reported Tuesday. While technically a 1.5% increase from August, the gain was largely an artifact of downward revisions to the prior month’s tally. Compared with September 2025, sales volume contracted by 2.2%.

For more than two years, transaction volume has oscillated around the 4-million mark, a persistent deficit when measured against the historical norm of roughly 5.2 million annual sales. This stagnation echoes the broader downturn that began in 2022 when the Federal Reserve initiated its aggressive interest-rate hiking cycle to combat pandemic-era inflation. Last year, existing home sales finished essentially flat, cementing a 30-year low for the sector.

Unlike previous housing downturns where falling demand triggered price corrections, sellers have maintained pricing power. The national median existing-home price climbed 1.3% year-over-year in September to $417,500, setting a record high for the month in data stretching back to 1999. Prices have now risen annually for 39 consecutive months.

This price resilience stems from the structural mechanics of the current market. Millions of homeowners who secured mortgages at rates between 2.5% and 3.5% during the pandemic are financially locked into their properties. Selling means forfeiting those historically cheap loans and buying a new home at 7.4%, a monthly payment differential that often exceeds several hundred dollars. This “rate lock-in” effect severely restricts the flow of existing homes onto the market, artificially supporting prices even as buyer demand weakens.

Buyers who can absorb current borrowing costs or transact entirely in cash are encountering conditions unseen in half a decade. Unsold inventory reached 1.6 million properties at the end of September, a 4.6% annual increase and the highest level recorded since November 2019. At the current sales velocity, it would take 4.8 months to clear the available supply. A market offering four to six months of inventory represents a balanced environment, a sharp departure from the extreme seller’s markets that defined the pandemic era when supply routinely fell below two months.

Cash buyers currently account for a disproportionately large share of transactions in high-rate environments, insulating them from the weekly fluctuations in bond markets that sideline financed purchasers. For traditional borrowers relying on conventional lending, however, affordability metrics remain deeply strained. The combination of record median prices and multi-year highs in mortgage rates requires significantly higher household incomes to qualify for the same properties that were accessible just two years ago.

Mortgage application volumes tracked by the Mortgage Bankers Association have remained depressed through early October, reflecting continued buyer hesitation as geopolitical volatility sustains upward pressure on energy markets and bond yields.