The latest report from the National Association of Realtors shows a decline in existing home sales for September. Rising mortgage rates, higher home prices and sluggish job growth are the culprits, according to the NAR.
Home sales, including single-family homes, townhomes, condominiums and co-ops, fell 1.9 percent last month, to an annual rate of 5.29 million units. Nationwide, the median existing-home price was $199,200 in September, up 11.7 percent from a year earlier.
Lawrence Yun, chief economist at the NAR, said in a release that the decline in sales was not a surprise. "Expected rising mortgage interest rates will further lower affordability in upcoming months," he noted. "Next month we may see some delays associated with the government shutdown."
Economic growth a key driver
While mortgage rates are having an impact in the short term, a slowgoing economy is having a broader impact on the housing market, says Lindsey Piegza, chief economist with Sterne Agee. Buyers who were on the fence already moved to secure a home while rates and prices were low, she adds. "The next wave of buyers is very rate sensitive and monthly-payment sensitive."
She expects the housing market to experience tepid growth. "We're buying some time with accommodative strategies by the Federal Reserve that will keep rates low," she says, but there are many factors that will have to show improvement before potential buyers will feel confident. The two main drivers will be job and income growth.
Today's employment report was disappointing, with 148,000 jobs being added in September, far below economists' expectations of 180,000 new jobs.
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