The Federal Reserve's inflation fight is running into a growing complication: The housing market is slumping even as broader price pressures persist.
Housing data deteriorated further in September, according to separate reports Tuesday, adding to an already complicated policy landscape for the central bank as it contemplates its next move on interest rates.
Things appear poised to get worse before they get better. If the Fed raises short-term rates as expected over the next several months, mortgage rates that are already at 7.43% could push even higher, putting a further damper on affordability. Higher home borrowing costs have coincided with a general rise in inflation and a housing shortage.
"The housing market is about to go into a deep sleep unless Washington can do a 180 on its policies and make the cost of a new home more affordable," wrote Chris Rupkey, chief economist at Fwdbonds. "It is not winter yet but housing is going into a deep freeze."
The National Association of Realtors reported that pending sales, a forward-looking index that measures home sales under agreement but not completed, hit an all-time low in records that stretch back to 2001. The index slid 7.3% for the month and was off 11.3% from a year ago. The Wall Street estimate was for a decline of just 0.4%.