In the latest data released by the National Association of Realtors, home sales in October fell by 5.9% compared to September, and the year-over-year decline reached 28.4%.

A perfect storm in the U.S. real estate market is approaching step by step.

On the other hand, the Federal Reserve is still planning to raise interest rates by 75 basis points in December.

This is a huge blow to both the stock market and the housing market, and the outlook for the U.S. and even the global economy is more complex and unpredictable than any past crisis.

01, Real Estate Storm

U.S. home sales have reached the lowest level since the COVID-19 pandemic, with sales data for October being the ninth consecutive month of decline this year.

Due to mortgage interest rates being at a 20-year high, coupled with inflation driving up prices and squeezing the spending power of ordinary residents, more and more potential buyers are now choosing to wait and see.

Sales declines always precede price declines.

Although sales data has been falling for nine consecutive months, housing prices continued to rise in the first half of this year, reaching a high of $413,800 for the median house price in June.

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Subsequently, starting in July, housing prices began to fall, and they have now experienced a decline for four consecutive months, with the current median price dropping to $379,100, a decrease of 8.4%.However, compared to the same period last year, this figure still increased by 6.6%. In terms of year-on-year data, this is the continuous year-on-year growth for ten consecutive years.

But, as interest rate hikes continue, whether it's a 75-point increase in December or a 50-point increase, it will further push up loan interest rates. It seems that the possibility of a further significant drop in US housing prices in 2023 is increasing.

02, Interest Rate Hikes

Since the US announced last week that inflation data fell more than expected, the market has generally been optimistic about future Federal Reserve interest rate hikes, believing that the probability of the Federal Reserve raising interest rates by 50 basis points in December has risen to 83%.

But the other day, the US released better-than-expected consumer retail data, which made analysts nervous again.

The President of the Federal Reserve Bank of Boston said yesterday that there is still a need to continue raising interest rates by 75 basis points in December. This is tantamount to throwing a large bomb into the financial market.

The US has already raised interest rates by a total of 375 basis points, but the CPI is still far from the target of 2%. This also makes the terminal interest rate of 4.6% predicted in September seem too conservative.

The other day, Bullard even proposed that it is necessary to raise interest rates to 5% to 7%.

It can be seen that more and more officials of the Federal Reserve are tending towards being hawkish.

Now there is still one month left before the Federal Reserve's last interest rate hike of the year on December 14th, and the economic data in the future period is particularly important.03, Stock Market

On the other hand, the recent inflation data released by the Eurozone and the UK remains very pessimistic, continuing to rise. However, the main European indices almost all rose last night.

The UK's increase reached 0.5%, and France and Germany rose by more than 1%.

The London stock market's consumer category led the gains, with a higher number of declining stocks coming from the service sector.

The US stocks that opened subsequently only rose slightly in the end, with the Nasdaq index almost flat, and the Dow Jones and S&P 500 rising by about 0.5%.

Most of the US tech giants saw little change, with Apple and META's gains less than 1%, and Tesla and Nvidia's declines slightly more than 1%.

However, China's financial index fell by 3% last night, showing that the decline in Chinese concept stocks was slightly greater than the average decline of the Nasdaq.