“Household spending has started to show signs of weakness but remains strong, despite price increases on essentials like food. Real personal spending grew faster than personal income in September, indicating that households are drawing down savings to finance spending.”

Ruben Gonzalez, chief economist at Keller Williams, expects sales and price declines to continue into 2023.

“Most homeowners have mortgage rates that are half of the current 30-year rate, and as a result, listings have slowed along with sales,” Gonzales said. “First-time buyers still face the prospect of home prices which have risen 40% since 2019 and now mortgage rates over 7%.

“As the Fed continues to combat inflation, the housing market will continue to slow as one of the most interest rate-sensitive industries. Homeowners’ equity levels are high because of the rapid appreciation, and mortgage default rates remain near all-time lows as markets cool.” 

“While the housing market is slowing, other corners of the economy have yet to follow suit,” Kushi added. “The Fed will likely be watching for sustained, data-driven signs of cooling in the labor market, and specifically wage growth before it eases the pace of rate hikes.”