Existing Home Sales Fall for Eighth Month in a Row, Leading Indicators Fall in September

Highlights Nov.03,2022 15:56

Sales of homes fell 1.5% in September, the eighth straight month of decline, as higher mortgage rates and still elevated prices preyed on the market, the National Association of Realtors reported on Thursday.

At an annual rate of 4.71 million, slightly better than the forecast of 4.69 million, sales are now 23.8% below a year ago and down from 4.8 million in August.

U.S. existing home sales fall for 8th straight month

'At least 95% chance of recession in the next 6-12 months' -analyst

Stocks fall as rise in yields overshadows earnings

“The housing sector continues to undergo an adjustment due to the continuous rise in interest rates, which eclipsed 6% for 30-year fixed mortgages in September and are now approaching 7%,” said NAR Chief Economist Lawrence Yun. “Expensive regions of the country are especially feeling the pinch and seeing larger declines in sales.”

Separately, a measure of future economic activity ticked down 0.4% in September after registering no change in August and is now down 2.8% over the past six months.

Political Cartoons on the Economy

The Conference Board’s Leading Economic Index “fell again in September and its persistent downward trajectory in recent months suggests a recession is increasingly likely before year end,” said Ataman Ozyildirim, senior director, economics at the business organization.

“The six-month growth rate of the LEI fell deeper into negative territory in September, and weaknesses among the leading indicators were widespread,” Ozyildirim added. “Amid high inflation, slowing labor markets, rising interest rates, and tighter credit conditions, The Conference Board forecasts real GDP growth will be 1.5 percent year-over-year in 2022, before slowing further in the first half of next year.”

The housing sector is slumping from the combined effects of mortgage rates that are near 7% for a 30-year fixed-rate loan and prices that are still higher than they were a year ago, although not increasing as rapidly as they did.

A survey of regional banks of the Federal Reserve, released Wednesday, showed the economy was expanding “modestly” but with several regions reporting a slowing down of demand. There were some bright spots, including travel and tourism, as well as manufacturing, and the jobs environment remained strong with some slowdowns in hiring reported.

Overall, the picture is one of a slowing economy with the possibility of a recession growing over the next 13 months. The Fed meets next month and is widely expected to raise interest rates yet again.

Next week, the government will release its first estimate of growth in the nation’s gross domestic product for the third quarter, with expectations for a number around 2.9%. Estimates have been moving up in recent days, even as forecasts of the probability of a recession in the next 12 months have grown.

Ironically, stocks rose on Thursday following better-than-expected earnings reports. The Dow Jones Industrial Average was up 370 points in mid-morning trading.