You know, I'm paying close attention to what Realtor.com Research just put out about September, because it tells us something important is shifting in how buyers and sellers are behaving. Mortgage rates climbed nearly forty basis points just in that one month and broke through the seven percent mark for the first time since early last year. That's a big deal, and the market felt it immediately. New listings dropped, homes under contract fell noticeably, and here's the kicker: price reductions jumped to their highest level since 2018. For the first time all year, we're seeing more sellers cutting prices than we did last year at this point.
What's interesting is that inventory is actually starting to look closer to normal. Active listings grew substantially year over year, and we're now within about nine percent of where inventory sat before the pandemic hit. That's the tightest gap we've seen in quite a while. You'd think all that extra inventory would help buyers, but the truth is fewer people are even looking right now. Pending sales dropped four percent year over year, which tells me that higher rates are keeping potential buyers on the sidelines more than anything else.
The regional breakdowns show us that the weakness is spreading. The West is actually experiencing the biggest jump in price cuts of any region, which caught some folks by surprise since everyone was watching the Midwest closely. Price per square foot is falling nationally, down close to two percent from last year. Looking at individual markets, some of the steepest declines are in places like Austin, Tampa, and San Francisco, though a handful of markets in the Northeast and Midwest are still holding up relatively better.
Looking ahead, Realtor.com Research notes we should be watching how deep these price cuts go and whether sellers start cutting multiple times in quick succession. The real story to follow is whether this stagnation we're seeing now, with inventory climbing while contracts shrink, continues through the rest of fall.
What I am seeing locally here in the Bay Area is that our market is definitely feeling this pressure. San Francisco specifically is showing inventory declining year over year while prices are dropping, which is a different dynamic than some other places. Sellers need to get realistic about pricing right now because buyer interest is softer than it normally would be. For buyers who are in the market, this environment actually presents some opportunity if you can get your financing sorted and your budget locked in before rates move again.
