After the Covid-19 pandemic, real estate investors did very well, despite the millions of Americans who lost their jobs and faced eviction during the 2020 lockdown. The stimulus package put a band-aid on the financial wounds inflicted by the Main Street business shutdown and supply chain dysfunction. Indeed, in the aftermath of the pandemic, the U.S. housing market soared to new heights, soaring amid rising inflation. Meanwhile, Federal Reserve Chairman Jerome Powell hinted this week that he believes the U.S. housing market needs a correction and can be adjusted “so that people can buy homes again.”
“Slowdown in home prices” is “a good thing,” Fed chairman declared
Last Wednesday, the U.S. Federal Reserve met to announce its next rate hike, and the central bank raised the federal funds rate by 75 basis points (bps).The Fed last weeksaid it aims to “achieve maximum employment”and the central bank remains on target for 2% inflation over the long term The three-quarter-point hike is the third 75 bps rate hike for the Fed After the 75 bps hike, stock markets, cryptocurrencies, and precious metals seemed to factor in the Fed’s rate hike.
However, the Fed chairman alsodiscussed the U.S. housing market this week, a comment that has rattled markets in recent days. Chairman Powell hinted at a real estate price adjustment or housing price cool down in order to bring inflation down to the 2% range.
Under the circumstances, Powell argued, “A decline in home prices should help to more closely align rents and other housing market fundamentals, and that’s a good thing. Powell told reporters Wednesday, “What we need over the long term is for supply and demand to be more in line, for home prices to rise at a reasonable level, at a reasonable pace, so that people can buy homes again.”
The 16th chairman of the Federal Reserve added:
In terms of a kind of business cycle, this difficult correction should bring the housing market back into better balance.
Average rate on 30-year fixed mortgages up 27 bps to 6.55%; economists say home prices still “significantly overvalued”
September 24, 2022 bankrate. com statisticsshow that the current average 30-year fixed loan is 6.55%. bankrate.com data shows that 30-year fixed mortgage rates have jumped 27 bps in the past seven days. According to recent datacollected by real estate firm Redfin, 10 areas of the U.S. are dropping faster than others. These include U.S. cities such as Seattle, Las Vegas, San Jose, San Diego, Sacramento, Phoenix, Oakland, North Port, Florida, and Tacoma, Washington.
Rick Palacios Jr., head of research at John Burns Real Estate Consulting, said, “The Fed’s change in word choice from ‘housing needs a reset’ in June to ‘a housing reset actually means a correction’ today clearly shows thatthat it is perfectly willing to allow home prices to fall, home sales to cool, and construction to pull back significantly in order to accomplish its mission.” Fortune magazine stated on Thursday that.
In response to Powell’s housing market commentary, USA Today reporter Terry Collins quoted a number of experts detailing that the U.S. is “definitely in a housing adjustment that will not end soon.” Mark Zandi, chief economist at Moody’s Analytics,toldUSA Today that the U.S. housing market is already in recession.
More than half of America’s top 400 housing markets are “significantly overvalued” by 25% or more, Zandi explained to Collins.
The chief economist at Moody’s Analytics remarked.
What are your thoughts on Fed Chairman Jerome Powell’s housing correction comments on Wednesday? Do you think the U.S. real estate market will continue to cool? Please share your thoughts on this topic in the comments section below.
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