High mortgage rates continued to squeeze the housing market, pushing new home sales down to their lowest pace in 13 years, data from the National Association of Realtors showed Thursday.
Many homeowners locked in mortgages with low-interest rates in the years following the housing bust. When the Federal Reserve pushed interest rates backdown during the pandemic, many more homeowners locked in low rates. More than 60 percent of homeowners have mortgages with rates below six percent, making them reluctant to sell their homes and buy new ones now that mortgage rates are pushing eight percent.
Existing home sales fell two percent after seasonal adjustment in September compared with the prior month. Sales are down 15.4 percent from a year ago.
The extremely low level of homes for sale has been putting upward pressure on home prices despite rising interest rates. The median existing-home sales price in September was 2.8 percent above the year ago level, at $394,300. This was the third consecutive month of year-over-year price increases.
The Federal Reserve began raising interest rates in the spring of 2022 after the Biden administration’s lavish spending programs combined with a too-accommodative monetary policy to spark the worst inflation in forty years.
“As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” said NAR Chief Economist Lawrence Yun. “The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains.”
Inflation has declined from its highs hit last year. But in recent months it has been holding steady and actually rose in September, creating worries that inflation could be more persistent than thought. The jobless rate in September was 3.8 percent, an extremely low rate by historical standards, and employers added 336,000 workers to payrolls.
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