US Markets
Tuesday, October 10th, 2023 1:45 pm EDT
Key Points
- Industry Appeal to Halt Interest Rate Hikes: Leading figures from the real estate and banking sectors have issued a call to the Federal Reserve, urging it to cease raising interest rates. They argue that the housing industry is grappling with soaring housing costs and a severe shortage of available homes for sale, which has created significant challenges. The appeal was made through a letter addressed to the Fed Board of Governors and Chair Jerome Powell.
- Concerns About Monetary Policy Impact: The National Association of Home Builders, the Mortgage Bankers Association, and the National Association of Realtors, representing the real estate industry, expressed profound concerns about the direction of monetary policy and its impact on the struggling real estate market. They argue that market uncertainty regarding the Fed’s rate path has contributed to recent interest rate hikes and increased volatility.
- Request for Fed Action and Challenges in the Housing Market: The industry groups are calling on the Federal Reserve to refrain from contemplating further rate hikes and to avoid actively selling its holdings of mortgage securities, at least until the housing market stabilizes. They emphasize that these steps are essential to prevent a potential hard landing in the real estate sector, which the Fed has sought to avoid. The housing market is currently facing constrained inventory levels, a nearly 30% surge in home prices since the early days of the COVID-19 pandemic, and a decline in sales volume by over 15% compared to the previous year. The letter highlights the challenges in housing affordability and disruptions in the market, exacerbated by a historic shortage of affordable housing.
Prominent figures in the real estate and banking sectors are urging the Federal Reserve to halt its interest rate hikes due to mounting concerns about surging housing costs and a severe shortage of available homes for sale. In a letter addressed to the Fed Board of Governors and Chair Jerome Powell, industry representatives from the National Association of Home Builders, the Mortgage Bankers Association, and the National Association of Realtors expressed their profound concern over the uncertainty surrounding the Fed’s rate path and its adverse effects on the struggling real estate market.
The letter calls on the Federal Reserve to refrain from considering further rate hikes and to hold off on actively selling its holdings of mortgage securities, at least until the housing market stabilizes. The industry leaders argue that these measures are crucial to prevent a potential hard landing for the real estate sector, which could have repercussions for the broader economy.
The housing market is currently grappling with constrained inventory levels, a nearly 30% surge in home prices since the early days of the COVID-19 pandemic, and a decline in sales volume by over 15% compared to the previous year. The rate hikes have exacerbated housing affordability issues and added disruptions to an already strained real estate market, further exacerbated by a historic shortage of affordable housing.
While the Federal Reserve has raised its key borrowing rate 11 times since March 2022, it is now evaluating its monetary policy approach. There is growing recognition among Fed officials that they may need to assess the impact of these rate increases before proceeding with further adjustments. However, the letter from industry representatives highlights the urgency of addressing the challenges faced by the real estate market.
Key statistics cited in the article include the average 30-year mortgage rate approaching 8%, the average home price reaching $407,100, and available inventory at a level equivalent to 3.3 months. To alleviate the price pressures, industry experts estimate that housing inventory would need to double.
The letter also underscores the historical spreads between the 30-year mortgage rate and the 10-year Treasury yield, as well as the role of shelter costs in driving consumer price inflation. It points out that the Fed has reduced its mortgage holdings by nearly $230 billion since June 2022 but has done so passively by allowing maturing bonds to roll off its balance sheet, without announcing plans for active selling of mortgage-backed securities.
In summary, the real estate and banking sectors are urging the Federal Reserve to reconsider further interest rate hikes due to the significant challenges and disruptions currently faced by the housing market. They argue that these challenges require immediate attention to prevent a potential hard landing and further economic turmoil.
For full original article on CNBC, please click here: https://www.cnbc.com/2023/10/10/housing-industry-urges-powell-and-fed-to-stop-raising-interest-rates.html
