The housing market got its second bearish datapoint in as many days on Wednesday, and this one carried a round number with it. The Mortgage Bankers Association reported that the average contract rate on a 30-year fixed-rate mortgage climbed 15 basis points to 7.12% in the week ended September 18 — the highest reading since May 2024, according to Reuters.
The move landed less than 24 hours after KB Home became the second major builder this month to report shrinking volumes.
Above 7% for the First Time in Two Years
The MBA's figure covers conforming loan balances and runs on a different survey from Freddie Mac's weekly average, which stood at 6.95% on September 17. Both are pointed the same direction, and both are tracking a bond market that pushed the 10-year Treasury yield above 5% last week for the first time since 2023.
Application volume responded predictably. The MBA's seasonally adjusted composite index fell 1.5% on the week. Purchase applications slipped 1% and sat 11% below their year-ago pace. Refinance applications dropped 3% and are running 62% below where they were a year ago — the slowest refi pace since February 2025.
One detail worth watching: adjustable-rate mortgages accounted for 9.8% of applications. When borrowers start trading rate certainty for a lower initial payment, it is usually a sign that fixed-rate affordability has become the binding constraint.
KB Home: Volumes Down, Margins Down, Backlog Up
KB Home reported fiscal third-quarter results Tuesday for the period ended August 31. Total revenues fell 20% to $1.30 billion. Diluted earnings came in at $1.05 per share, down from $1.61 a year earlier — a 41% decline.
The volume figures tell the story more clearly than the revenue line. Homes delivered fell 19% to 2,732. Net orders dropped 12% to 2,604, worth $1.21 billion, with a cancellation rate of 18%. Monthly net orders per community slowed to 3.1 from 3.8.
Pricing, notably, held up. The average selling price was $473,000, down just 1% year over year. Builders are losing transactions, not pricing power — at least not yet. Housing gross profit margin compressed to 16.5% from 18.2%, though it improved sequentially from the second quarter.
The one genuinely positive line: ending backlog rose for the first time in four years, up 2% to 4,398 homes and up 3% to $2.05 billion in value. The company guided full-year deliveries to 10,500–11,000 homes and housing revenues to $4.90–$5.10 billion.
Executive Chairman Jeffrey Mezger said the company "produced third quarter financial results that reflected solid sequential improvement," while acknowledging to the Associated Press that "conditions weakened in the already tough housing market over the last three months" on higher mortgage rates, geopolitical uncertainty and "broader economic headwinds."
President and CEO Robert McGibney pointed to the strategic shift: "We achieved our goal of returning to a predominantly Built to Order business, with BTO homes representing nearly three-quarters of our deliveries."
KB Home is not alone. Lennar reported new orders down 9% to 20,879 homes and cut its full-year delivery target to roughly 80,000–81,000 from 82,000–83,000.
The Backdrop
Equities were soft in early Wednesday trading. As of 9:35 a.m. ET, the Dow was down 107 points (0.2%), the S&P 500 off 0.1% and about 0.5% below the record it set last month, and the Nasdaq Composite down 0.3%, per the Associated Press. The 10-year Treasury yield edged up to 4.99% from 4.96% late Tuesday. KB Home shares were down about 1%.
Brent crude rose 1.3% to $100.55 a barrel even as investors weighed Tuesday's U.S.-Iran talks at the United Nations. Pre-war Brent traded near $72.
For housing, that combination is the problem in miniature: energy prices keeping inflation expectations elevated, yields near 5%, and a mortgage rate that has now crossed a threshold buyers notice.
Sources: Mortgage Bankers Association Weekly Applications Survey (via Reuters/Investing.com); KB Home 2026 third-quarter results (PR Newswire); Associated Press market report by Chan Ho-Him, September 23, 2026; Freddie Mac Primary Mortgage Market Survey.