Pending home sales hit all-time low as Fed weighs more hikes — SkimNews
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- Pending home sales plunged 7.3% in September to an all-time low in data stretching back to 2001, down 11.3% year-over-year — far worse than the Wall Street estimate of a 0.4% decline.
- Privately owned housing starts fell 5.2% against expectations for a 0.4% drop, while single-family permits totaled just 845,000, the lowest since 2023, per Commerce Department data.
- The 30-year mortgage rate ended September around 7.6%, up from roughly 3% five years ago, with more than 95% of existing borrowers holding rates below the prevailing level.
- Goldman Sachs forecasts residential investment to decline 2.5%, 4%, and 1% over the coming three quarters, projecting single-family starts of 875,000 in 2027 and existing home sales 26% below pre-Covid 2019 levels.
- Fed officials said they are tracking inflationary effects of AI investment while believing AI-driven productivity gains could offset weakness in sectors such as housing.
- CME FedWatch futures pricing implies a strong chance of a quarter-point hike in December and another in March 2027, even though markets expect steady rates at next week's meeting.
- Lawrence Yun, NAR's chief economist, floated that mortgage rates may be topping out since they have already risen much more than the Fed's short-term rate hikes.
Why it matters: More than 95% of mortgage borrowers hold rates below 7.6%, creating a lock-in effect that suppresses existing-home turnover — meaning further Fed hikes would hit new buyers and builders hardest. Goldman projects residential investment falling for three straight quarters, and pending sales already hit a record low, so additional rate moves risk deepening the housing slump while doing little to ease broader inflation driven by goods and AI-linked demand.
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