September was a rough month for housing activity on both sides of the market, with buyers and builders pulling back at the same time.

Signed Contracts Dropped Hard

Pending home sales, which track signed contracts for existing homes, fell 7.3% from August and 11.3% from a year ago, and every region declined. NAR's Lawrence Yun tied it to fast-rising mortgage rates, and I think that's right. When rates move quickly, buyers and sellers tend to freeze first and adjust later.

Builders Are Pulling Back Too

Housing starts fell 5.2% to a 1.22 million annual pace, below expectations. Completions fell 14% from a year ago to 1.19 million, and permits edged down 0.2% to 1.4 million. The NAHB builder index dropped three points to 29, its lowest in 14 years, with builders citing rates, labor shortages, and rising energy and material costs.

At the same time, plenty of owners with pandemic era low rates are still reluctant to sell, and permitting and construction timelines limit how fast new supply shows up. That combination could help support prices, especially in markets that were already short on homes.

The Bond Rally Has Some Shaky Reasons Behind It

Bonds rallied this week, but it was a flight to safety. France has had more than 500,000 protesters, rioting, looting and curfews, and rising French yields have coincided with more demand for U.S. Treasuries. On top of that, there is growing concern about the debt AI infrastructure companies like CoreWeave, Nebius and Oracle took on to fund data center buildouts. Tesla and Meta talking about more disciplined spending made it worse, because if big customers scale back, those companies could struggle to repay.

Where I'm Less Sure

A rally built on fear is not the same as one built on cooling inflation. If the unrest settles or the AI credit worries fade, that safe-haven demand can unwind and rates can bounce right back. The Fed is widely expected to hold this week, but PCE inflation on Thursday could change the tone fast. I'd enjoy the relief without planning around it.

I'm also not fully sure the supply story keeps prices up if contracts keep falling. Thin supply and weak demand are pulling in opposite directions, and I don't think anyone knows yet which wins in the near term.

The Jobs Numbers May Be Hiding Something

Initial jobless claims are low at about 194,000, but continuing claims rose by 25,000 to 1.73 million. Some people who lose jobs go freelance or gig instead of filing, and some workers may have simply run out of benefits. If you own rentals, that is worth keeping in mind for tenant quality and rent collection.

Investor Takeaway

Underwrite to today's rates and treat any bond market relief as a bonus, not the plan. Weaker contract counts do not automatically mean lower prices, because supply is still constrained and builders are pulling back, but the slower pace gives you room to negotiate. Favor deals that cash flow without needing rates or prices to break your way. Tuesday's home price data and New Home Sales, the Fed on Wednesday, and Thursday's PCE inflation and GDP will help show which direction this leans next.