Rents Accelerate While For-Sale Demand Fades
Zillow's September market report, released October 6, found the typical U.S. rent climbed 2.7% from a year earlier to 1,932 dollars, the fastest annual rent growth recorded since April 2025. The increase stands out against a for-sale market that cooled earlier than usual this year. Zillow's preliminary nowcast put closed existing-home sales down 2.5% year over year in September, while newly pending sales, a forward-looking measure of future closings, fell 8.5% from the same month last year.
The divergence points to two different pressures squeezing households at once. Renters are facing accelerating monthly costs even as overall inflation has moderated elsewhere in the economy, while prospective buyers are backing away from signing contracts as financing costs climb. Zillow's report attributed the pullback in pending sales to mortgage rates ending September at 7.28%, the highest weekly average recorded by Freddie Mac since November 2023.
The Math Behind a Higher Monthly Payment
Zillow calculated that a monthly mortgage payment on a typical home carrying a 20% down payment, excluding taxes and insurance, is now 6.7% higher than it was a year ago. That increase has occurred even though the Zillow Home Value Index shows home values up just 1% over the same period, illustrating how much of the added cost is coming from financing rather than price appreciation.
As a labeled calculation: if a buyer financed 80% of a 400,000 dollar home a year ago at roughly 6.3% over 30 years, principal and interest would run close to 1,978 dollars a month; financing the same loan amount today at 7.28% raises that payment to roughly 2,187 dollars, an increase of about 209 dollars, or 10.6%, driven entirely by the rate move rather than the price of the home. Zillow's own 6.7% payment-growth figure reflects national averages across a broader mix of home values and is not identical to this single-loan example, but both point in the same direction: financing costs, not sticker prices, are doing most of the damage to affordability this fall.
Inventory Is Rising but Not Fast Enough to Offset Rates
The report noted new listings were up just 0.4% from last September, a figure still 11.9% below pre-pandemic norms for the month, while total for-sale inventory ran 2.5% above year-ago levels. That modest inventory growth has not been enough to counteract the chilling effect of higher borrowing costs on transaction volume.
On the rental side, the acceleration to 2.7% annual growth signals that landlords are regaining some pricing power after a multiyear stretch of softer rent gains tied to a wave of new apartment supply. Zillow's research team described the combination of a slowing for-sale market and firming rents as consistent with households that might otherwise buy choosing to remain renters for longer, adding demand to an already tightening rental pool heading into the winter months.