Housing groups plead with Fed to halt interest rate hikes amid industry struggles.
Three Top Housing Groups Call on Federal Reserve Chair Jerome Powell to Stop Increasing Interest Rates
Three leading housing organizations have joined forces to urge Federal Reserve Chair Jerome Powell to halt the ongoing increase in interest rates. The Mortgage Bankers Association, the National Association of Realtors, and the National Association of Home Builders have expressed their deep concern about the impact of the Fed’s rate hikes on the housing industry, which is already grappling with a historic shortage of affordable homes.
In a letter dated October 9, the housing groups emphasized that the uncertainty surrounding the Fed’s rate path has contributed to recent interest rate hikes and market volatility. They argue that these rate increases have worsened housing affordability and caused disruptions in the real estate market, which is already struggling due to a significant decline in mortgage origination and home sale volume.
The housing groups also attribute the high inflation to increasing shelter costs, including rent and mortgage payments. In September, shelter costs were the largest contributor to the Consumer Price Index, rising 0.6 percent monthly and 7.2 percent from the previous year.
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The housing groups warn that further interest rate hikes could pose significant risks to economic growth and increase the likelihood of a recession. They urge the Fed to refrain from considering additional rate hikes and to hold off on selling its mortgage-backed securities until the housing market stabilizes.
The Federal Reserve declined to comment on the matter when approached by The Epoch Times.
Mortgage Rates Reach Historical High
Housing costs have skyrocketed this year, with average monthly mortgage payments and rents exceeding $2,000. Experts attribute this surge to a shortage of housing supply and higher interest rates.
The housing market has been severely impacted since the Fed began raising interest rates from near zero percent in March 2022 to 5.25 percent in an effort to combat inflation.
These rate hikes have also influenced other rates, particularly the 10-year Treasury yield, which is closely tied to mortgage rates. According to Freddie Mac, mortgage rates have reached a 23-year high of 7.57 percent.
As a result, many potential homebuyers are hesitant to enter the market due to increased borrowing costs. Existing homeowners are also reluctant to sell their properties to avoid losing their current low mortgage rates secured during the pandemic. This has led to a decrease in housing transactions, negatively impacting real estate brokers and agents.
Increase or Pause?
After raising interest rates by over five percentage points in the past 19 months, the Fed is now considering whether to continue increasing the benchmark lending rate. In their September meeting, they decided to keep rates unchanged.
Currently, the futures market indicates a potential rate pause at the upcoming policy-setting meetings in November and December of the Federal Open Market Committee (FOMC).
Some Fed officials believe that interest rates are already high enough, and the recent rally in Treasury yields could assist in achieving the central bank’s objectives.
The minutes from the September FOMC meeting reveal that officials debated whether to implement one more rate increase. While some participants favored another increase, others believed that no further hikes would be necessary until inflation returns to the target level of 2 percent.
Although policymakers agree on the need for cautious decision-making, they concur that policy should remain restrictive until they are confident that inflation is sustainably decreasing.
Andrew Morgan and Tom Ozimek contributed to this report.
What risks do further interest rate hikes pose to economic growth and the likelihood of a recession, according to the housing groups
Been grappling with an acute shortage of affordable homes, and the recent increase in interest rates has further exacerbated the problem. This has led three top housing groups, namely the Mortgage Bankers Association, the National Association of Realtors, and the National Association of Home Builders, to come together and call on Federal Reserve Chair Jerome Powell to put a stop to the ongoing rate hikes.
In a joint letter dated October 9, these housing organizations voiced their deep concern regarding the impact of the Federal Reserve’s rate increases on the housing industry. They highlighted the uncertainty surrounding the Fed’s rate path as a contributing factor to recent interest rate hikes and market volatility. According to the groups, these rate increases have worsened housing affordability and caused disruptions in the real estate market, which is already struggling due to a significant decline in mortgage origination and home sale volume.
The housing groups further attributed the high inflation to increasing shelter costs, including rent and mortgage payments. In September, shelter costs were the largest contributor to the Consumer Price Index, rising 0.6 percent monthly and 7.2 percent from the previous year. This highlights the urgency of addressing the affordability crisis in the housing market.
The risks associated with further interest rate hikes were also underscored by the housing groups. They warned that such moves could pose significant risks to economic growth and increase the likelihood of a recession. In light of this, the groups urged the Federal Reserve to refrain from considering additional rate hikes and to hold off on selling its mortgage-backed securities until the housing market stabilizes.
However, the Federal Reserve has declined to comment on the matter when approached by The Epoch Times.
In a related development, mortgage rates have reached historical highs, further adding to the burden of housing costs. Average monthly mortgage payments and rents have exceeded $2,000 this year. Experts attribute this surge to the shortage of housing supply and higher interest rates.
The combination of the housing shortage and rising interest rates has made it increasingly difficult for individuals and families to find affordable housing options. This has far-reaching implications for both the housing market and the broader economy, as the stability and affordability of housing play a crucial role in overall economic well-being.
In conclusion, the joint call by the Mortgage Bankers Association, the National Association of Realtors, and the National Association of Home Builders to halt the ongoing increase in interest rates reflects the concerns of the housing industry regarding the impact of these rate hikes. The housing market is already grappling with a historic shortage of affordable homes, and further rate hikes could exacerbate the situation. It is imperative for the Federal Reserve to carefully consider the consequences of its policies on the housing industry and the overall economy as it charts its course for the future.
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