The U.S. labor market showed signs of continued stability last week, but rising mortgage rates are creating additional pressure for homebuyers and the housing industry.
Initial claims for state unemployment benefits fell by 10,000 to a seasonally adjusted 196,000 for the week ending Sept. 12, according to Labor Department data reported by Reuters.
The four-week average, which helps smooth short-term volatility, also declined.
The unemployment rate stood at 4.1% in August, while employers added 162,000 jobs during the month.
Housing conditions have moved in the opposite direction.
Mortgage rates have climbed toward 7% as borrowing costs have increased, creating affordability problems for prospective homebuyers already confronting elevated home prices.
Permits for construction of new single-family homes declined 1.8% in August. Builder sentiment has also been pressured by high financing costs, labor constraints and expensive construction materials.
The Federal Reserve’s decision Wednesday to raise its benchmark interest rate could keep borrowing costs elevated as the central bank attempts to reduce inflation.
Higher mortgage rates can dramatically increase monthly payments even when home prices remain unchanged.
For example, the difference of even one percentage point on a mortgage rate can add hundreds of dollars to the monthly payment on some loans.
Economists have also pointed to limited housing supply and high construction costs as structural problems that interest-rate policy alone cannot resolve.
