Economic data released on Tuesday added more mixed signals on the housing market in the wake of the wide fluctuations in mortgage rates over the past two months. At the same time, consumer confidence fell to the lowest level in four months as expectations markedly deteriorated.
To begin with, housing prices set a record in July, according to the S&P CoreLogic Index, rising by 0.87% on a seasonally adjusted basis. August’s new home sales, however, dropped by a sharp 8.7%, erasing the entire increase from July, which was revised up to an 8% gain from 4.4%.
One reason for the rise in housing prices and the upward revision to new home sales in July was most likely because of a relatively small increase in mortgage rates, to 6.8% from 6.7%, in July, according to Freddie Mac.
That encouraged some buyers to lock in their rates in anticipation of rates going higher, which turned out to be true. Mortgage rates in August spiked to 7.22%, the highest in more than 20 years, dampening sales of new homes.
With inflation rebounding and the Federal Reserve contemplating another interest rate hike in November, mortgage rates should continue to put a strain on the housing market.
And with the UAW strike, a looming government shutdown and some student loan payments restarting, there are downside risks to economic growth and the labor market. Those risks might be enough to keep the Federal Reserve from hiking its policy rate one more time.
Consumer confidence
American consumers are not as optimistic as before, according to data released by the Conference Board on Tuesday, and that does not bode well for growth.
Consumers are expecting fewer jobs, lower incomes and, as a result, reduced spending over the next six months, according to data released by the Conference Board on Tuesday.
Read more of RSM’s insights on the economy and the middle market.
The income index—which measures the difference between incomes that have increased and those that have decreased—fell to 1.9, the lowest since last November.
For the time being, job gains improved slightly, according to the survey results. The labor differential index—which measures the difference between jobs that are plentiful and job that are hard to get—inched up to 27.3 from 26.7.
But the index has been on a clear downtrend since February, staying below the 2019 level, before the pandemic, for two months in a row.
We expect September’s jobs report, which will be released next week, to show a slowing labor market given the current economic conditions.
