US housing activity is weakening as mortgage rates rise
While the overall economy continues to grow thanks to solid consumer spending and the AI-related capex boom, the housing sector is in considerable pain. The situation may well get worse before it gets better given the Fed’s mini-tightening cycle and the rise in mortgage rates.
After spending the last couple of years hovering at COVID-era lows, pending home sales hit a new record low in September, with sales down 7.3% MoM. Given the magnitude of the decline, it was no surprise that the pullback was broad-based geographically, but the West and South regions led the declines. Rising mortgage rates are intensifying the affordability problem with little relief in sight. The 30-year conforming mortgage rates have jumped from just about 6.0% in February to 7.4% in mid-October. A slight bid on Treasurys recently may arrest that ascent at least temporarily, but it will not provide meaningful relief.
The gloomy situation is reflected in dismal readings for the NAHB-Wells Fargo homebuilder sentiment index. The overall index slipped three points in October to settle at 29, taking out the COVID-era low of 30. Enough said…
