June 13, 2024
2 years ago

Pending Home Sales Plunge as US Housing Market Gets Rocked by High Mortgage Rates

The Epoch Times| by Jack Phillips| October 30, 2022

The number of pending home sales plunged in September due to soaring mortgage rates, according to data released on Friday by the National Association of Realtors.

The group’s pending home sales index declined 10.2 percent last month, far exceeding what analysts had predicted for September. Pending transactions fell 31 percent year-over-year, it found.

It noted that with the Federal Reserve’s recent monetary tightening policies and sticky inflation, people aren’t looking to purchase homes. The Fed has raised rates by 75 basis points during three consecutive meetings to tamp down decades-high inflation.

“Persistent inflation has proven quite harmful to the housing market,” National Association of Realtors Chief Economist Lawrence Yun said in a news release. “The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers.”

The 30-year fixed mortgage rate recently pushed past 7 percent, according to the group. Yun said that many homeowners who have fixed mortgage rates of 3 percent or lower are not willing to sell their properties.

“The new normal for mortgage rates could be around 7 percent for a while,” Yun added. “On a $300,000 loan, that translates to a typical monthly mortgage payment of nearly $2,000, compared to $1,265 just one year ago … a difference of more than $700 per month. Only when inflation is tamed will mortgage rates retreat and boost home purchasing power for buyers.”

Recent data provided by the S&P CoreLogic Case-Shiller Index show that home prices are falling at a record pace. The metric reported annual gains of 13 percent in August, marking a decline from 15.6 percent in July.

“The forceful deceleration in U.S. housing prices that we noted a month ago continued in our report for August 2022,” Craig Lazzara, with S&P Dow Jones Indices, said in a statement. “Price gains decelerated in every one of our 20 cities. These data show clearly that the growth rate of housing prices peaked in the spring of 2022 and has been declining ever since.”

Data released by the Department of Labor show that the consumer price index, a key inflation metric, rose 8.2 percent year-over-year in September, running near 40-year highs.

Core inflation, a gauge watched by the Federal Reserve, rose to 5.1 percent in September, according to data released Friday. Core inflation does not factor in energy and food prices, which often have volatile price fluctuations.

Because of the attempts to curb high inflation, some CEOs have warned that a recession will likely hit the United States in the coming months. Economic modeling from Bloomberg News places the odds of a recession at 100 percent.

Source: Pending Home Sales Plunge as US Housing Market Gets Rocked by High Mortgage Rates (theepochtimes.com)