The U.S. housing market has been an important contributor to the country’s economic recovery from the pandemic, but recent high prices and high interest rates have cooled the market. The National Association of Realtors reported that existing home sales in July 2022 totaled 4.7 million at a seasonally adjusted annual rate, down 28% from the rate at the beginning of the year. The Commerce Department reported that new one-family homes were selling at a 685,000/year pace in August — down from 831,000 in January. Meanwhile, a leading indicator for the industry, housing permits, has turned lower as well. According to the Census Bureau, permits were being authorized in September at a 1.6 million annual rate, down from 1.9 million in March. Housing prices remain hot. The S&P/Case-Shiller National Home Price Index for July 2022 showed that the average price rose 15% year-over-year. The high prices and high mortgage rates — the average rate on a 30-year fixed-rate mortgage was recently 6.94%, the highest rate in 20 years — have boosted housing inventories. Currently there is an 8.1-month supply of existing homes for sale (the typical range is 4.5-7.5 months), according to the U.S. Census Bureau. Until pricing pressures ease further, the housing sector will not be supportive of U.S. economic growth.
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