Home Sales Unexpectedly Rise Despite Higher Rates

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What's Happening Today

Despite higher mortgage rates, the number of new homes being sold jumped in October, according to the Census Bureau's latest report this morning, rising 7.5% since the month prior, but still 5.8% lower than this time last year.

For much of this year, rising mortgage rates and higher home prices have made it harder to afford a house, ultimately throwing cold water on the once red hot real estate market. The average rate on a 30-year fixed-rate loan spiked from 6.29% at the end of September to a two-decade high of 7.08% at the end of October, according to data from Freddie Mac.

And while those higher mortgage rates have caused many interested homebuyers to sit out and wait, recent easing could renew interest and optimism. Currently, the average rate on a 30-year fixed-rate mortgage sits at 6.61%. Higher interest rates on home loans have also caused home price growth to slow, potentially giving more of an opening to prospective homebuyers to negotiate better prices.

The rise you see in mortgage rates is all thanks to the Federal Reserve, which has been hiking interest rates in an attempt to bring inflation down. The Fed has hit us with several jumbo-sized rate hikes this year alone (to the tune of 75 basis points), which sends interest rates on mortgages, credit cards, and more, soaring.

Rate hikes have caused volatility in the markets, because higher interest rates take a bite out of future earnings. As a result, investors have been paying very close attention to comments from policymakers at the Fed (also known as "Fed Speak"), watching for clues on the strategy the central bank will take going forward.

This afternoon, investors could get more insight when minutes from the Fed's most recent policy meeting are released. We'll be able to see if policymakers think they need to hike rates aggressively going forward, as well as their thoughts on inflation.

- Kristin

Programming Note: The Balance Today will be taking a short break for the Thanksgiving holiday tomorrow. From us here at The Balance, we want to wish you and your family and loved ones a safe and happy holiday!

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Term of the Day

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Off the Charts

The average rate for a 30-year fixed mortgage reached its highest in decades last month, but fell sharply last week according to data from Freddie Mac.