Housing market ‘brought to its knees’ by Federal Reserve: Expert
Yahoo Finance’s Dani Romero joins the Live show to discuss the U.S. housing market and how the Fed’s inflation fighting tactics are affecting the space.
Video Transcript
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JARED BLIKRE: Now, anyone shopping for a new home has seen it firsthand. US home sales going hot-- from hot to ridiculous levels. Yahoo Finance's Dani Romero has more on how the Fed's inflation fighting tactics are weighing on the housing market. What are you seeing?
DANI ROMERO: Jared, what I've been hearing, the way it's being described to me, is that the housing market is being brought to its knees by the Federal Reserve. That's what a macro strategist from Bespoke Investments told me yesterday following the drop in the mortgage demand from the-- that we saw from the Mortgage Bankers Association seasonal index. So yes, those higher mortgage rates are really taking a hit on the housing market, and it could get worse. That macro strategist is estimating that the volume of mortgage demand could fall 10%. And not only that, but mortgage rates could peak 8%. Yes, today, we did see mortgage rates dip to 6.6%. But to put this into perspective, climbing rates has added $337 to a typical monthly mortgage payment, that is according to Redfin Data.
But again, this all goes back to the Fed's decision. If they continue to slow down economic activity, then we are going to see slower demand for mortgages. And so far, there's been no indication that the Fed is backing off. And we also haven't had any inflation prints to show that inflation is coming down.
JARED BLIKRE: That's right. And part of the Fed's strategy is to-- well, not cripple the economy, but also-- but hamper the economy a little bit. Unemployment has to rise. And we already-- just said that people are facing mortgage-- increases in their mortgage payments of about $330, somewhere in that ballpark. Is there a ray of sunshine? Where is the hope here?
DANI ROMERO: Yeah. So home prices have come down. But again, that's not really correlated to inflation. One part of the housing market that is correlated to inflation is rents. Apartment rents have come down. We saw that from July to August. But that's because people are paying so much for everything else that there's really no-- little wiggle room really for rents. So yes, you know, landlords are losing their pricing power. Tenants are-- they're also losing tenants as well. So yes, rents are still elevated and prices are high. They're expected to come down, but that could take some time. And also, it goes back to the issue of supply and demand.
JARED BLIKRE: Yeah. With a lag. It's not going to help me on that lease I just signed. But thank you for the report here. Yahoo Finance's Dani Romero.
