Homebuyers are still facing affordability headwinds due to elevated mortgage rates despite sellers increasingly cutting prices, a new report from Realtor.com shows.

Realtor.com’s latest monthly housing report showed that the share of listings with price cuts reached the highest level for the month of September on record, with 20.8% of active listings having a price reduction, which is an increase of 0.9 percentage points from last year.

Active inventory of homes for sale also increased by 5.4% from a year ago to more than 1.161 million homes, which narrowed the gap with the typical pre-pandemic inventory levels to 9.1% – the first time the gap is below 10% in the current recovery.

“Recent moves in mortgage rates weighed on the housing market in September,” said Jake Krimmel, senior economist at Realtor.com. “Rates are up nearly 40 basis points over the past four weeks, and over a full percentage point since the Iran War began in late February.”

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“The year-over-year picture is worse: after running below 2025 levels through July, rates are now more than 70 basis points above last year, a gap that has widened quickly because rates were falling last September and are rising this one,” Krimmel added.

Those dynamics are influencing behavior in the housing market for both buyers and sellers, with there being a pullback this year after a somewhat stronger fall a year ago.

“For sellers, that shows up in growing inventory – with listings growth accelerating at exactly the time of year when its pace usually slows – and in more price reductions. For buyers, the number of homes under contract is down 4.1% year over year,” Krimmel said.

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Krimmel noted that home delistings were little changed in September as under 6% of listings nationally were pulled from the market, which was in line with last year’s figure and showed “no evidence of the late-summer/early-fall delisting spike that higher rates and softer demand could otherwise trigger.”

The median listing price declined 1.2% on a monthly basis in September and 1.4% from a year ago to $419,250 nationally. That figure is up 34.2% when compared with September 2019.

The median list price per square foot was $223 in September, down 0.6% from a month ago and 1.7% last year. That figure is up 48.1% when compared with September 2019.

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Looking ahead to October, Krimmel said he’ll be monitoring how sellers respond to even tougher conditions in the housing market.

“This is the time of year when leverage usually shifts more toward buyers, but unexpectedly higher mortgage rates means even fewer buyers are showing up than normal this fall,” he said.

“It is worth watching how deep the discounts get, whether some sellers resort to multiple cuts in quick succession, and if that actually results in more signed contracts or just leaves homes sitting longer,” Krimmel explained.

“Also, pending sales and inventory growth have been diverging for a few months now, a sign of stagnation that will be worth following in October,” he added.