U.S. home resales fell in September and prices rose at their slowest pace in five months, the latest signs higher mortgage rates were taking some edge off the housing market recovery.
Continue Reading Below
The National Association of Realtors said on Monday home sales fell 1.9 percent to an annual rate of 5.29 million units. August's sales pace was revised down to 5.39 million units from the previously reported 5.48 million units.
Economists polled by Reuters had expected home resales to fall 2.9 percent to a 5.30 million-unit rate.
"The housing market recovery has lost a little steam which is not a surprise with the broader economy taking a bit of a step back recently. The housing market could be a little bumpy the rest of the year," said Ryan Sweet, senior economist with Moody's Analytics in West Chester, Pennsylvania.
The NAR said a combination of high home prices, barely rising salaries and higher mortgage rates was weighing down on affordability, which hit a five-year low in September.
"Expected rising mortgage interest rates will further lower affordability in upcoming months," said NAR chief economist Lawrence Yun.
Continue Reading Below
The Realtors group said home resales had probably peaked in July and August. The drop in homes resales adds to other data that have suggested the high borrowing costs are starting to slow the housing market recovery.
Contracts to buy previously owned houses declined in August for a third straight month. Confidence among homebuilders fell in October for the second consecutive month, while loans to buy a home have declined for the past three weeks.
Interest rates have risen sharply since May on expectations that the Federal Reserve would start cutting back on its monthly bond purchases this year, with the 30-year fixed mortgage rate surging a full percentage point.
It rose to 4.49 percent in September, the highest since July 2011, from 4.46 percent in August, according to Freddie Mac. Still, mortgage rates remain low by historical standards.
The Fed surprised markets last month by sticking to its monthly $85 billion bond buying program, seeking more evidence of strong economic growth.
Also pointing to a moderation in the pace of the housing market recovery, the median price for a previously owned home rose 11.7 percent from a year ago to $199,200. That was the slowest pace of increase in five months.
While overall home sales rose 10.7 percent from a year ago, that increase was also the smallest in five months.