Housing Market Crash Alert: Real Estate Groups Urge Fed to Stop Rate Hikes
After multiple interest rate hikes from the U.S. Federal Reserve, it’s getting tougher to afford the mortgage payments on a new home. This issue has some investors and commentators concerned about a possible housing market crash.
Amid this worrisome backdrop, several real estate groups penned a letter, hoping for some relief from high interest rates. However, there are signs that some Fed officials might finally be ready to back off of their hawkish interest rate policy soon.
Housing Market Crash Fears Prompt Letter About Rate Hikes
Here’s the rundown. The Mortgage Bankers Association (MBA), National Association of Realtors (NAR), and National Association of Home Builders (NAHB) wrote a letter to Federal Reserve Chairman Jerome Powell recently. They pointed out that mortgage interest rates have “reached a 23-year high, dragging application activity down to a low last seen in 1996.”
As you’ve probably figured out by now, they cited high interest rates as a contributing factor to this problem. Consequently, these real estate associations asked Powell to “not contemplate further rate hikes.”
Moreover, they asked that the Fed “not sell off any of its” mortgage-backed securities “holdings until and unless the housing finance market has stabilized and mortgage-to-Treasury spreads have normalized.”
This may sound like a dire situation, but there might be some relief soon for the real estate market. Philadelphia Federal Reserve President Patrick Harker reportedly stated, “Absent a stark turn in what I see in the data and hear from contacts … I believe that we are at the point where we can hold rates where they are.”
Moreover, Boston Fed President Susan M. Collins assured that the Fed is “likely close to the peak of this tightening cycle.” It appears, then, that at least some Federal Reserve officials are prepared to stop raising interest rates.
What Does This Mean for You?
It’s difficult to predict the likelihood of an imminent housing market crash. For the most part, home buyers and investors should continue with whatever plans they’ve already had in place.
On the other hand, it’s important to keep a lookout for clues as to the potential path of interest rates. This means monitoring the financial headlines for statements from Fed officials regarding rate hikes. That way, you’ll be informed and can adjust your plans accordingly, if necessary.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
