Real Estate

How Will the Housing Market be Affected by Rising Federal Reserve Interest Rates?

Experts Weigh In on the Impact of Another Expected Interest Rate Hike

iShook Opinion

May 3, 2023 - 14:09

May 3, 2023 - 14:12

1 75

How Will the Housing Market be Affected by Rising Federal Reserve Interest Rates?

Federal Reserve Interest Rates Hike | Image Credit: aljazeera

The Federal Reserve is expected to raise interest rates again, and many people are wondering how this will impact the housing market. Despite a previous increase more than a year ago, mortgage rates have more than doubled. Although the expectation was that higher mortgage rates would help bring down housing prices, this hasn't happened yet. Instead, the rate hikes have caused homebuyers and sellers to sit on the sidelines, contributing to high home prices and a lack of inventory. Experts weigh in on what another expected interest rate hike could mean for the housing market.

Another Interest Rate Hike Expected Despite High Mortgage Rates

The Federal Reserve is expected to raise the Federal Funds Rate target by another quarter point on Wednesday, according to Taylor Marr, Redfin Deputy Chief Economist. Despite the fact that mortgage rates have more than doubled since the last interest rate hike more than a year ago, experts say the Fed is still likely to raise interest rates again. However, this week's hike is expected, and it should not impact mortgage rates.

Impact on Housing Market: More Dampening or Boosting?

The impact on mortgage rates will ultimately determine whether the housing market gets a boost or is further dampened, according to Marr. If the Fed hints strongly that another rate hike is likely, mortgage rates may not drop much. However, if there is confirmation of a pause, it could put downward pressure on long-term bond yields, and homebuyers could see some mortgage rate relief.

Lawrence Yun, Chief Economist at the National Association of Realtors, believes that mortgage rates will fall in the second half of the year, which could boost homebuying. He explains that mortgage rates are likely to descend lower later in the year as the consumer price inflation calms down and changes the thinking of the Fed from tightening to possibly loosening the monetary policy.

Consumer Confidence a Key Driver for Housing Market in the Second Half of the Year

Despite the cost of borrowing, consumer confidence levels could be the key driver for how the housing market will fare, according to Lisa Sturtevant, Chief Economist at Bright MLS. Consumer confidence in the U.S. economy fell in April, according to the latest report from the Conference Board. While consumers' assessment of the current business environment improved somewhat in April, their expectations fell and remain below the level that often signals a recession looming in the short term.

Sturtevant believes that consumer confidence, which dipped to a nine-month low last month, could be the most important metric to watch. How people are feeling about economic uncertainties could be the key driver of what the housing market looks like in the second half of the year. An economic downturn later this year, even a mild one, could send mortgage rates a little lower in the second half of the year.

Although the expectation that higher mortgage rates would decrease soaring housing prices hasn't been fully realized, the rate hikes have resulted in both home buyers and home sellers taking a wait-and-see approach.

BREAKING: The Federal Reserve raised interest rates by 25 basis points and hinted it may be the final move in the most aggressive tightening campaign since the 1980s https://t.co/LyWXQmllI6 pic.twitter.com/uMJDr4LvI4 — Bloomberg (@business) May 3, 2023

Tags:

IMF Predicts Resilient Economic Growth for India in FY23

iShook Opinion A Personal Note from the Desk of the CEO Welcome to iShook Finance, the premier finance news journalistic platform that brings you the most relevant, timely, and insightful information in the world of finance. As the CEO and founder, I am proud to share my vision and values with you, so you can better understand what drives our passion and commitment to delivering outstanding financial news. At iShook Finance, we believe that the world of finance is more than just numbers and spreadsheets; it's a living, breathing ecosystem that connects people, businesses, and governments. Our mission is to empower individuals and organizations to make informed decisions by providing accurate, in-depth, and thought-provoking financial journalism. My personal journey in the world of finance has been marked by curiosity, a relentless pursuit of knowledge, and a deep desire to share insights with others. As a finance enthusiast, I have always been passionate about understanding the intricacies of the global economy and the forces that shape it. With iShook Finance, my aim is to create a platform where our readers can access a wide range of perspectives, opinions, and expert analysis that will guide them through the ever-evolving financial landscape. Our team of dedicated journalists, analysts, and editors work tirelessly to bring you the most accurate and up-to-date information. We take great pride in our journalistic integrity and adhere to the highest ethical standards, ensuring that our content is always unbiased, balanced, and data-driven. At iShook Finance, we recognize that the world of finance is not a one-size-fits-all scenario. Our readers come from diverse backgrounds with unique financial goals and concerns. As such, we strive to provide a variety of content that caters to the needs of both seasoned professionals and novice investors alike. In today's fast-paced digital world, it is essential for us to stay ahead of the curve. We are committed to embracing emerging technologies, trends, and innovative storytelling methods to ensure that our content remains engaging, relevant, and accessible to our audience. As the CEO, my promise to you is that iShook Finance will continue to evolve and grow, staying true to our core mission of providing reliable and insightful financial news. I invite you to join us on this journey and share your thoughts, questions, and feedback with us. Together, we can redefine the way financial news is delivered, consumed, and understood. Thank you for choosing iShook Finance as your trusted source for finance news. Warm regards, Beni E Rachmanov CEO & Founder, iShook Co.