Housing Market Gets Hit as Mortgage Rates Skyrocket Ahead of Midterm

The U.S. housing market faced a significant downturn in September due to rapidly increasing mortgage rates, which could potentially impact President Donald Trump and Republicans as they approach the midterm elections. According to data from the National Association of Realtors, pending home sales, which track signed contracts for existing home purchases, dropped 7.3% from August and 11.3% year-over-year.

This decline coincided with a steep rise in mortgage rates, which began around 6.8% in September and reached 7.6% by month's end, recorded by Mortgage News Daily.

Kevin Thompson, CEO of 9i Capital Group, noted that higher rates will undoubtedly slow the housing market and force buyers with lower rates to stay put, leading to a prolonged housing market standstill. Housing affordability has emerged as a crucial issue in the upcoming November 3 midterm elections, particularly for younger voters and the overall economy. Existing home prices averaged $417,500 in September, marking a 1.3% increase from the previous year and the highest recorded September price.

President Trump had campaigned on reducing household expenses, including borrowing costs, but rates have not decreased as promised and have, instead, risen. Freddie Mac's 30-year mortgage average increased to 7.40% by the week ending October 8, the highest level since November 2023. This situation is unfavorable for the ruling party, as borrowing costs continue to escalate across the board, according to Thompson.

Affordability remains the key factor, and a worsening affordability situation may result in a more significant decline in approval ratings for the president and his administration.

Homebuilder sentiment has also turned pessimistic, with the NAHB's October reading reaching its lowest level in 14 years. While completed existing-home sales increased 1.5% in September, reaching a seasonally adjusted annual rate of 3.99 million, they were still 2.2% lower than a year earlier and represented the slowest monthly sales rate of 2026.

Home inventories rose by 1.9% to 1.60 million homes, the highest level since November 2019, suggesting that the market's struggles are not primarily due to a shortage of listings.

Inflation continues to affect various aspects of the economy, and as long as inflation remains a concern, mortgage rates are expected to remain high. Despite the affordability challenges, some indicators suggest that buyers may gain more negotiating power. Realtor.com found that 20.8% of listings had a price reduction in September, up 0.9 percentage points from the previous year and the highest September share since October 2022. Active listings also increased by 5.5% from September 2025 to over 1.16 million homes.

The upcoming midterm elections, scheduled for November 3, have made housing and affordability a critical issue for many voters. A Pew Research Center survey of 5,062 U.S. adults, including 3,917 registered voters, conducted from September 28 to October 4, found that 84% of registered voters considered the economy very important to their vote.

This concern was particularly pronounced among younger voters (82% of Republicans and 88% of Democrats). Housing costs have emerged as a top issue for voters aged 18 to 34, surpassing food costs and the protection of democracy. However, it's essential to understand that mortgage rates are influenced by a complex interplay of factors, including bond market dynamics, geopolitical events, and monetary policy, rather than direct Federal Reserve intervention.