Pending home sales, a key indicator of housing activity, reached a two-decade low in September. This decline is attributed to rapidly increasing mortgage rates that are deterring potential buyers. The number of signed contracts on existing homes dropped significantly both month-over-month and year-over-year. This cooling trend is particularly evident in previously strong housing markets like the South and West.Mortgage rates saw a sharp surge in September, making housing affordability a major concern for consumers. Despite positive job growth and income gains, rising mortgage rates have a more substantial impact on home purchases. Home buyers are also facing uncertainty due to increasing energy prices and resulting inflationary pressures.In addition to lower sales, new home construction also experienced a slowdown. Housing starts, a measure of residential construction, decreased in September compared to the previous month and the prior year. Homebuilder sentiment has also soured, reaching a 14-year low. Builders are grappling with rising mortgage rates, higher construction costs, and broader inflation. They also face challenges with construction loans, materials, and immigration enforcement. These supply-side constraints and affordability issues are making builders cautious and keeping buyers on the sidelines.