On The Money — Housing market plunges deeper as rates rise

Sylvan Lane
·5 min read
1

Home sales are falling off a cliff as rising interest rates, stubborn inflation and low housing construction weigh on the market. We’ll also look at ways to prepare for a recession and hopes for a bipartisan cannabis breakthrough.

📄 But first, find out why President Biden and the National Archives are getting sued over JFK assassination records.

Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Someone forward you this newsletter? Subscribe here.

US saw record drop in home sales in September

Home sales declined the most on record in September as mortgage rates surged and pushed prospective buyers out of the once-hot housing market, according to a new report.

A report from the real estate company Redfin shows the number of homes sold fell by 25 percent and new listings dropped by 22 percent last month, marking the biggest declines on record in both categories — excluding numbers at the onset of the coronavirus pandemic in April and May 2020.

The Hill’s Adam Barnes has the details here.

The decline is driven by higher mortgage rates and a cooling economy. Several pieces of new data released Wednesday reveal just how much the Federal Reserve’s rate hikes have transformed the housing market:

LEADING THE DAY

How to prepare for a potential recession in 2023

Many market watchers are predicting a recession in 2023 as the Fed continues to raise interest rates in its battle against 40-year-high inflation.

Due to a persistently hot job market, a recession is not a certain fate, but the economy has already contracted for two quarters in a row, and a period of cooling off after the blistering recovery from pandemic shutdowns is only logical, some analysts say.

Here are a few ways to get in good financial shape for a recession:

  • Take advantage of a red-hot labor market while it lasts: At least one economic projection has put the likelihood of a recession within the next 12 months at 100 percent, but there’s hardly a consensus on when or even if a recession is going to occur. A big driver of that uncertainty is the job market, which shows high demand for workers, implying continued growth in the economy. 

  • Keep an eye on the housing market: In the U.S., the housing market is another major driver of inflation, with rents and mortgage rates soaring amid a national housing shortage that numbers in the millions of homes, according to various studies and commercial estimates. 

  • Adjust personal finances: With the Fed raising interest rates, paying for goods and services with financing is going to get more expensive. So experts say that putting off major purchases and paying down debts now is a good way to save money as interest rates creep up toward 4.6 percent in 2023, according to the latest median estimate from the Fed.

The Hill’s Tobias Burns has more tips here.

BUDDING HOPES

Biden order adds momentum to bipartisan marijuana bill

President Biden’s move to reevaluate marijuana’s legal status and pardon federal weed convictions has reinvigorated momentum for congressional action to boost the ailing cannabis industry.

Lawmakers see the lame-duck session as their best chance yet to pass the SAFE Banking Act, a bipartisan measure that would enable cannabis businesses to more easily access banking services and loans.

  • Rep. Ed Perlmutter (D-Colo.), who first introduced the bill in 2019, told The Hill this week that there’s “a lot of activity” around the legislation, which he said some senators have referred to as “SAFE Banking Plus” amid ongoing negotiations.

  • The bill — which would be a boon for cash-only dispensaries that are plagued by robberies and exorbitant banking fees — has already passed the House six times in recent years. But it’s stalled in the Senate amid concerns from top Democrats who said it doesn’t do enough to support communities disproportionately harmed by the nation’s drug laws.

Karl and Aris dig more into this here.

COURT BATTLES

Supreme Court urged to halt Biden’s student loan forgiveness plan

A group of Wisconsin taxpayers on Wednesday asked the Supreme Court to block the Biden administration’s student loan forgiveness program while an appeal plays out in a lower court.

The emergency request, filed to Justice Amy Coney Barrett, who handles emergency matters arising from Wisconsin, comes shortly after the administration began accepting applications for the program.

  • The challengers, the Brown County Taxpayers Association, urged the court to rule that the president’s nationwide debt cancellation plan illegally encroaches on Congress’s exclusive spending power. 

  • In their Wednesday filing, the challengers urged the Supreme Court to find that Biden’s debt cancellation policy would have major political and economic consequences, despite clear authorization by Congress — violating what the court last term dubbed the “major questions doctrine.”

The Hill’s John Kruzel breaks it down here.

Good to Know

The IRS on Tuesday announced rule adjustments to account for inflation for the
2023 tax year, including shifts for tax brackets and the standard deduction.

The IRS releases inflation adjustments annually, but this year’s announcement comes amid heightened economic concerns about high inflation and a potential recession.

Here’s what else we have our eye on:

  • The Treasury Department sanctioned a Russian national and two of his companies on Wednesday for allegedly transferring sensitive U.S.-based military technology to Russia.

  • A political advocacy group created to support President Biden’s agenda on Wednesday released an ad touting the administration’s student loan relief program.

  • Speaker Nancy Pelosi (D-Calif.) in a new interview said Democrats need better messaging on inflation, which has been top of mind to voters ahead of next month’s midterm elections.

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.

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