By Greg Heym, Brown Harris Stevens Chief Economist and host of Crossing The Line
Today, we present the latest data on housing sales and mortgage rates. Welcome to the "it's all about housing" edition of The Line.
Mortgage Rates Hit Their Highest Level Since the Beginning of August
I’m sorry that we started with such a depressing headline, but rates are pretty much driving the housing market these days. The average 30-year conforming mortgage rate rose to 6.54% this week, up from 6.44% the previous week. Rates are now at their highest level since the week ending August 1st.
To put a happy spin on things, let me point out that one year ago rates were sitting at 7.79%, which was a 23-year high. Feel better now? I didn’t think so, but I had to at least try.
Unfortunately, the fact that rates have risen almost half a percent in the past month will push many potential buyers back to the sidelines. I can understand that, especially since prices in many markets are still rising.
Rates have shot up over the past few weeks, due to a series of better-than-expected economic reports, and a worse-than-expected inflation report. I’m not saying that we should root for bad economic news, but the bond markets will need to see proof that the economy is slowing before rates come down again.
Existing Home Sales Fall to Lowest Level Since 2010
Two bad headlines to start a column is not a good idea, but unavoidable. Existing home sales—which are counted at closing—fell 1% in September to their lowest level since October 2010. You can’t blame this data on the recent surge in mortgage rates, as most of the contracts for these closings were signed more than a month ago. That said, rates were higher in July and August than they are now.
The real culprit here remains low inventory, which has kept prices high. Even though the number of existing homes for sale is up 23% over the past year, it still represents just a 4.3-month supply of houses. Remember that NAR considers any number below five an indication of a seller’s market.
I would expect to see an increase in existing home sales in the next few months, as buyers took advantage of the sharp decline in rates that ended a month ago. The big question is when will inventory be high enough to push prices lower?
New Home Sales Rise to Highest Level Since May 2023
Let’s end today with a happy headline. New home sales—which are counted when contracts are signed—rose 4.1% in September to their highest mark in almost 1-1/2 years. Since new home sales are based on contracts instead of closings, they give us a more real-time look at the housing market. This further supports my prediction of higher existing home sales in the coming months, but look for sales of both new and existing homes to head lower in the future, if rates continue to rise.
Have a great weekend, and let’s go Yankees!
