Published:
Housing is flashing warning signs just as the Fed weighs more interest rate hikes
September housing indicators deteriorated—pending sales fell to an all-time low, housing starts and permits also weakened—raising the risk that higher mortgage rates intensify the slowdown even as inflation remains a Fed priority.
Fresh housing data for September points to a continued deterioration in US market conditions at the same time the Federal Reserve is weighing whether to add to restrictive policy. The National Association of Realtors said its pending-sales index, a forward-looking measure of contracts signed but not yet completed, fell 7.3% for the month and reached an all-time low in records going back to 2001. It was also down 11.3% year on year, compared with a Wall Street expectation for only a small decline.
Other indicators cited in the report also underscored a weakening pipeline. Privately owned housing starts fell at a seasonally adjusted annualised rate of 5.2% versus expectations for a 0.4% drop, and building permits were down 0.2% compared with a consensus call for a 2% gain. For single-family permits, the article notes a total of 845,000, down 4% from August and the lowest since 2023.
The story links the slide to fast-rising borrowing costs, noting that the 30-year mortgage rate was above 7% for most of September and ended the month around 7.6%. It also places the housing weakness in the Fed’s policy trade-off: easier policy can spur demand by lowering rates, but the Fed is described as fighting inflation and potentially prioritising price pressures over a flagging housing picture. The next thing to watch is whether further disinflation emerges without allowing inflation to re-accelerate, which would influence how constrained policy remains for housing and the broader growth outlook.
Why this matters for FX
Housing weakness can shift the expected path of interest rates by increasing pressure for eventual easing, but if inflation is still sticky the Fed may be reluctant to cut—keeping real-rate and USD policy expectations tight. Mortgage-rate changes feed directly into demand and growth expectations, which can affect broad risk appetite and capital flows, influencing USD and rate-sensitive currencies.