Pending sales and mortgage applications take a huge hit

Before we dive in

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- David

Pending sales and mortgage applications take a hit 

Pending home sales fell 8.4% year-over-year in September as 30-year mortgage rates hovered near their highest levels since 2003, sitting at 7.56% this week, according to Mortgage News Daily. That’s according to the latest market update from realestatnews.com and CNBC. 

Here’s what they report:

• Pending sales are sliding. Pending sales fell 8.4% year-over-year in September and 10.5% in the most recent week, according to Compass. Closed sales were down 2.5%, per Zillow.

• Mortgage applications are dropping. Purchase applications were 15% lower than a year ago, while refinance applications plunged 56% to their lowest level since 2025, according to the Mortgage Bankers Association.

• Inventory is up, but new listings aren't. Inventory rose 4.4% year-over-year as homes sat on the market longer, and price reductions are increasing.

• Renting is winning out. Rents rose 2.7% year-over-year, the biggest jump since April 2025. A typical mortgage takes 34.4% of median household income, compared with 26.3% for rent.

• Buyers want much lower rates. Only 6% of consumers would accept a rate around 7.5%, while about half would accept a rate between 5% and 5.49%, according to John Burns Research and Consulting.

• Expect lower sales. Zillow expects sales to stay below last year's pace through the year-end.

My take

Homebuyers are still waiting for a market that no longer exists. Many are holding out for rates to drift back toward 6%, but the reality is moving in the opposite direction: rates keep climbing, and right now there's no clear ceiling in sight. With the Fed likely to raise interest rates one more time before the year is out, the pressure on borrowing costs isn't letting up anytime soon. Until buyers adjust to this new rate environment rather than waiting it out, the market will keep stalling, and sales will almost certainly finish the year below last year's pace.

Older homeowners will free up 13.9 million homes by 2036

13.9 million homes owned by Baby Boomers (born 1946 - 64) and the Silent Generation (born 1928 - 45) will be released between 2026 and 2036, according to Realtor.com. That's 74% more than the 8 million homes these two generations released over the past 10 years. 

A home counts as "released" when its owner dies, moves into a care facility, combines households, or moves into a rental. 

These are the key facts to know about this wave of releases:

• Releases will accelerate. They'll grow from 1.27 million in 2027 to 1.52 million in 2036, averaging 1.39 million a year.

• Boomers take the lead around 2029. Their releases keep climbing, with the peak expected after 2036.

• Family homes dominate. About 9.9 million homes with 3 to 4 bedrooms will be released, 71.2% of the total.

• Large homes get the biggest boost. Annual releases of 360,000 equal 67.2% of current large-home listings.

• Starter homes see little relief. Only 380,000 will be released over the decade, about 38,000 a year, or 3% of the total.

• Price drops will be uneven. Expect softening in family and large homes and slower-growing markets, but no nationwide decline.

My take

Most coverage of this report will focus on the 13.9 million homes, but the more telling number is 859,000. That's how many new households Harvard projects will form each year over the next decade, down from an average of 1.2 million since 2000. So more homes are coming just as fewer people are lining up to buy them. In places like the Midwest, where older owners are letting go fastest, that mismatch could tilt things toward buyers sooner than people expect. In expensive coastal markets, it will barely register. Make no mistake: the wave is coming. But its impact on prices and buyers will depend heavily on geography and the types of homes being released.

Metros with the largest profit margins from flipping

In Q2 2026, the typical profit margin for a flipped home was 21.5%, down from 25.7% in the previous quarter and 27.6% from Q2 2025. That continues a gradual two-year decline. These figures are gross profits (sale price minus purchase price) and don't include renovation or other costs.

Here are the key stats to know:

• National gross profit: $60,526, down from $66,932 in Q1 2026 and $71,000 in Q2 2025

• Best purchase-price range: Homes bought for $100,000 to $200,000 had typical margins of 28%

• Worst purchase-price range: Homes bought for $50,000 or less lost $15,000, a -38% return

• Median flip days: 161 days from purchase to resale (down from 165 days in Q1 2026)

And, among metros with populations over 1 million, here are the metros with the largest and lowest profit margins in the country:

My take

Flippers aren't waiting for better conditions. Even as their typical profit margin fell from 27.6% to 21.5% in a year, they kept buying, selling and moving faster, with the typical flip now taking 161 days, down from 166. Their priority is clear: take a smaller profit, recover their capital and move on to the next deal. For agents, these are clients worth pursuing in a sluggish market. Investors follow the numbers, not mortgage-rate sentiment, and every flip represents two potential transactions. Deliver sharp pricing, quick turnarounds and a steady pipeline of opportunities, and you'll have clients who keep closing while others sit on the sidelines.

Schematics

The news that just missed the cut

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• If you want more business as an agent in 2027, do this

• It’s true: San Francisco’s downtown real estate is undergoing a renaissance

Foundation Plans

Advice from David to win the day

As I noted up top, pending sales are down and mortgage applications took a hit. It’s not hard to understand why. Mortgage rates just hit a 52-week high, and the 10-year Treasury yield reached its highest level since 2007. So how do you find leads and close deals when mortgage rates spike?

That’s exactly the question Tom Toole tackles in this piece. It’s excellent and over the next two editions, I’ll unpack his key themes and add my own two cents along the way. 

1. Remember: even when the market gets tough, transactions don’t go to zero. You need to wrap your mind around this because this idea is crucial. It will reframe your entire outlook on the situation.

Just think back to our story about flipping.  Experienced investors didn't wait for perfect conditions; they kept working while others sat still. That's a lesson to learn: every market has people who need to transact regardless of how "good" it looks, and your job is to find them and become the agent who understands them better than anyone else — their problems, their motivations, what keeps them up at night. Do that, and you're not chasing a market that ebbs and flows. You're building a client base that transacts no matter what.

2. Remember that people move no matter what rates do. It’s not just investors who transact when rates go high. Roughly 3 to 5% of the population buys or sells a home every year. High rates shrink that pool, but job transfers, growing families, and divorces keep it from disappearing. Keep calling while other agents wait it out.

That’s it for part one. In the next installment, I’m going to get into the nitty gritty of scripts and role playing with you, but I wanted to stop right here, because these first two points are the foundation for everything else. 

The best dealmakers don't wait for perfect conditions: they learn how to find opportunities in imperfect markets.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

“You’ve gotta keep control of your time, and you can’t unless you say no. You can’t let people set your agenda in life.” — Warren Buffett

Don’t let events or other people set your agenda. Stay ruthlessly focused on your goals — your time is limited, and you only get one life. Make the most of it. Have a wonderful week.

We’ll see you back here on Friday!

- David