Have higher rates changed the housing market?
Slate did a deep dive into this exact question. Their takeaways were as follows:
- More homeowners who were looking to upgrade will likely keep their existing mortgages longer. 66% of outstanding mortgages are at rates below 4%. A nicer home at a higher rate won’t compare favorably.
- Buyers are dropping out of the market with pending transactions down 24% year-over-year.
- Wages aren’t keeping up with higher housing costs. The number of renters with the income to afford a mortgage has fallen from 10.2 million people last year to 5 million this year.
- On the positive side, home values have dropped slightly, but they haven’t gone down rapidly. Meaning, there are no signs of a market crash or ‘severe correction’.
Sellers aren’t selling?
According to Yahoo Finance, sellers are getting discouraged by the slowing housing market and pulling back their listings. As a result, pending home sales are as low as they’ve been since the early days of the pandemic, and may get lower if inventory and a willingness to buy don’t pick up soon.
Rough week for Wall Street
Most sectors of the financial markets ended down on Thursday on worries that the Fed’s continued fight against inflation could limit the growth of the U.S. economy as a whole. The S&P 500 touched lows last seen in November 2020, and is down over 8% for the month of September.
Fed officials did speak on Thursday, and none gave any indication that they would slow their fight against inflation.
The good news was that Americans filing new unemployment benefits claims hit a five-month low in data released from the Labor Department. This may indicate that the Fed has a long way to go to combat inflation.
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