Why strong job growth could further dampen home sales 

The U.S. economy is stuck in a strange period where too much of a good thing means bad news for others. In this case, the latest data on jobs could mean an even more challenging market for potential homebuyers.

Last month, 336,000 jobs were added, blowing past many economists' expectations of around 170,000 additions. While that's good news for the labor market, it's also a signal to the Federal Reserve that the economy is still running hot, making it even harder to tame inflation. That could increase the likelihood of another rate hike at the Fed's next meeting in early November.

"Today's report is likely to add further fuel to the trends driving interest rates, including mortgage rates, higher," said Realtor.com Chief Economist Danielle Hale. She noted that the Fed will also consider a variety of other data points, including inflation measures, that will influence their decision.

"No matter the outcome of the November meeting, it's likely that investors will continue to prepare for the possibility of higher short-term rates for longer, which will keep upward pressure on longer-term rates for Treasuries and mortgages, keeping borrowing costs for consumers high," Hale said.

The employment report appeared to have an immediate effect on mortgage interest rates. In its first reading on Oct. 6, Mortgage News Daily reported that average 30-year mortgage rates rose to 7.84%, hitting a new 23-year high.

Economic anxiety could bring home sales down to 10-year low

This has put the economy in an out-of-sorts place, and elevated rates will continue to stifle the real estate market, said Lisa Sturtevant, chief economist for Bright MLS.

"Jobs are being added to the economy and wages are rising, but consumers and businesses are feeling increasingly anxious," Sturtevant said. "For the housing sector, this anxiety coupled with higher mortgage rates will mean fewer buyers in the market, with a contraction in sales activity, and the lowest number of home sales in more than a decade." 

There was perhaps one silver lining in the jobs report for the real estate market. While still rising at 4.2% year-over-year, wage growth has slowed.

"Slowing wage growth was the one positive data point for those hoping for slowing inflation in today's labor market report," said Robert Dietz, chief economist at the National Association of Home Builders, in a blog post.

Some believe the strategy of keeping interest rates elevated is doing too much damage to real estate. Lawrence Yun, chief economist for the National Association of Realtors, said the latest jobs report does not mean "all is well," because it is a lagging indicator, and key parts of the job market like commercial real estate and retail are flashing warning signs.

"The fast-rising interest rates are breaking several sectors of the economy. The remaining sectors will also likely crack if the rate hikes continue," Yun said. "Given that the inflation rate is already cooling, the Fed needs to stop raising rates and strongly consider cutting interest rates next year. That would be the soft landing without the net job cuts to the economy."