Home sales drop as inflation concentrates in housing on August 22, 2023 at 8:21 pm Business News | The Hill

Home sales are down, mortgage rates are up, and the dregs of inflation are collecting disproportionately in the housing market.

Sales of already-built homes fell 2.2 percent in July, dropping 16.6 percent from where they were a year ago, the National Association of Realtors reported Tuesday.

The total for July clocked in at a seasonally adjusted 4.07 million existing homes. Home sales have been falling roughly since they bounced back in the autumn of 2020 when the recovery from pandemic shutdowns took off.

The housing market is caught between a rock and a hard place, with a physical shortage of units dogging renters and first-time home buyers while the Federal Reserve has been cranking interest rates, leading to soaring mortgage prices.

The 30-year fixed-rate mortgage, which is the nation’s most popular, is now at the highest level in more than 20 years at 7.09 percent, according to data from government mortgage backer Freddie Mac, published last week.

“The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb,” the agency said in a statement.

Mortgage rates and housing costs are particularly responsive to rate hikes by the Fed. They have moved virtually in tandem with each other over the course of the recovery from the pandemic.

But inflation in the housing sector is virtually all the inflation that remains in the economy, so the logic that further interest rate hikes by the Federal Reserve are needed in response to inflation is unclear.

“The index for shelter was by far the largest contributor to the monthly all items increase, accounting for over 90 percent of the increase, with the index for motor vehicle insurance also contributing,” the Bureau of Labor Statistics reported for July.

Markets are currently not predicting another rate hike at the Fed’s next meeting in September.

An interest rate prediction algorithm assembled by financial company CME put the odds of the Fed holding steady at 85 percent, as of Tuesday afternoon.

​Business Home sales are down, mortgage rates are up, and the dregs of inflation are collecting disproportionately in the housing market. Sales of already-built homes fell 2.2 percent in July, dropping 16.6 percent from where they were a year ago, the National Association of Realtors reported Tuesday. The total for July clocked in at a seasonally…