Housing Slumps as Fed Weighs Rate Hikes Amid Inflation Fight — SkimNews
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- National Association of Realtors reported pending home sales hit an all-time low in records dating to 2001, sliding 7.3% for the month and off 11.3% year-over-year, far worse than the Wall Street estimate of a 0.4% decline.
- Commerce Department data showed housing starts fell 5.2% month-over-month against expectations of just 0.4%, with single-family permits at 845,000 — the lowest since 2023 — down 4% from August even as building permits came in 0.2% lower against forecasts for a 2% gain.
- Mortgage rates held above 7% through September, ending the month around 7.6% per Mortgage News Daily, compared with roughly 3% five years ago that fueled the Covid-era housing boom; more than 95% of borrowers now carry rates below current levels, with 65% at least 2 percentage points below.
- Federal Reserve officials face a tension between housing weakness and stubborn inflation, with wholesale final demand goods prices rising 2.6% — the fastest pace in a Bureau of Labor Statistics series going back to December 2009 — while markets price a strong chance of a December quarter-point hike and another in March 2027.
- Goldman Sachs forecasts residential investment to decline 2.5%, 4%, and 1% over the coming three quarters, with economist Ronnie Walker attributing the stagnation to a "lock-in" effect in which current homeowners can't afford to take on higher borrowing costs and deteriorating affordability chills new construction.
- Fwdbonds chief economist Chris Rupkey wrote the housing market is "about to go into a deep sleep" unless Washington reverses policy on affordability, while NAR's Lawrence Yun countered that mortgage rates may be topping out given they've already risen more than the Fed's short-term hikes.
Why it matters: Homebuilders, sellers, and first-time buyers are caught in a squeeze where rate cuts alone won't unlock frozen inventory — 95%+ of existing borrowers hold rates at least 2 percentage points below current market, creating a lock-in that suppresses turnover no matter what the Fed does. The Fed's hand is further tied by wholesale prices rising 2.6% in the fastest BLS print since 2009, leaving a housing market already at a record-low pending-sales reading exposed to deeper declines through 2027 if rates keep climbing.
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