Home sales slow down as mortgage rates bite
High mortgage rates are causing real-estate slowdowns in both the United States and Canada, raising worries about the broader economic impact – as well as hopes that central banks will stop hiking rates.
The number of existing home sales in the United States in August was the lowest since January, and the September numbers are expected to be lower still. The Wall Street Journal reports that sales are likely at a level not seen since the end of the 2008-2011 financial crisis.
In Canada, existing home sales fell in September for the third straight month. “Expect a quieter than normal winter with all eyes on the Bank of Canada,” said Canadian Real Estate Association senior economist Shaun Cathcart.
This is likely to put downward pressure on prices, as some homeowners, unable to keep up with higher mortgage payments, are forced to sell their homes.
The slowdown in the recently superheated real estate market, and the decline in inflation in both countries, has analysts expecting central banks to stop raising rates.
Economists can’t predict how it will all wash out, but both Justin Trudeau and Joe Biden, as incumbents, will bear the brunt of continued inflation, or an economic downturn from central banks tightening money supply to fight inflation. On Thursday, Federal Reserve Chair Jerome Powell said that the central bank is unlikely to raise interest rates again unless he sees signs of the economy overheating, which may give both Biden and Trudeau hope that the fundamentals will change before they face reelection.