US Housing Market Slumps, But Home Prices Are Not Falling Yet

what happened

Barron's reports that the US housing market is weakening: builder sentiment fell to its lowest level in 14 years, pending home sales in September hit a record low, and mortgage rates rose to as high as 7.4% according to Freddie Mac. Prices, however, are holding up. The S&P Cotality Case-Shiller Index rose 2.1% year on year in August, and the National Association of Realtors reported a median September sale price of $417,500, up 1.3% from a year earlier.

Most of the 17 economists and analysts who responded to Barron's expect price gains to slow or flatten by 2027. Sellers, they say, are unwilling to accept big discounts and can pull listings and wait, while buyers are in no rush to purchase.

The main risks to that outlook are Middle East conflicts and the path of interest rates. Lower mortgage rates would bring buyers back and support prices, while a recession with rising unemployment could cause a shallow but short-lived decline, according to Moody's Analytics.

why it matters

The key point for markets is that weak sales are not yet turning into falling prices. That reduces the case for quick relief in mortgage costs and leaves rates as the main driver of demand, which matters for homebuilders and mortgage-linked assets.

market impact

US homebuilders and mortgage market: weak sales with stable prices keep pressure on demand and rates

• ▼Homebuilder stocks pressure down — falling sales and weak builder sentiment pressure their revenue outlook

tags

instruments