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Home sales continue to fall as Fed raises interest rates

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US home sales slowed in August, the seventh straight month of declining sales.

The National Association of Real Estate Agents said On Wednesday, existing home sales fell to 4.8 million last month, down 0.4% from July. Home sales have fallen by almost 20% in the past year and are at their lowest annual rate since May 2020. The housing market has been mortgage interest top 6%doubled their level in January.

According to mortgage buyer Freddie Mac, the average rate on a 30-year home loan rose to 6.02% last week, above 6% for the first time since 2008. Every percentage point increase in mortgage rates adds hundreds of dollars to monthly payments. The jump in rates means a typical homebuyer can buy up to . pays $600 more per month for a 30 year mortgage.

“Rising mortgage rates have clearly hampered the housing market,” said NAR chief economist Lawrence Yun.

In its ongoing battle against inflation, the Federal Reserve on Wednesday raised the target rate by 0.75 percentage point — the fifth walk this year. But the latest Federal Funds rate hike is unlikely to affect mortgage rates in the near term, as current borrowing costs had already “priced in” the Fed’s three-quarter-point move, Redfin chief economist Daryl Fairweather told CBS. Money Watch.


Federal Reserve raises interest rates again to fight inflation

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Still, economists expect home sales to continue to decline for the rest of this year, but note that prices remain higher than a year ago. The national median home price in August was $389,500, up from 7.7% a year ago, according to NAR.

Higher home prices and interest rates have pushed mortgage payments on a typical home from $897 to $1,643 a month, an 83% increase over the past three years, according to Zillow.

“As the market cools, there is less competition per home, more time to make these critical decisions, and more bargaining power in the hands of buyers than at any time in years past,” said Nicole Bachaud, senior economist at Zillow. . “Sellers, on the other hand, have to adjust their expectations.”

The Associated Press contributed to this report.

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