In the wake of the Covid-19 pandemic, real estate investors have done very well, despite the millions of Americans who were fired from work and faced evictions during lockdowns in 2020. The stimulus put a bandage on the financial wounds caused by the shutdown of Main Street business and disruption to supply. chains. In fact, after the pandemic, the housing market in America has boomed to new heights and surged amid rising inflation. Meanwhile, US Federal Reserve Chairman Jerome Powell hinted this week that the US housing market needs a correction, and believes it can be adjusted in such a way that “people can buy homes again.”
Fed Chairman Says ‘Slowdown in Home Prices’ Is a ‘Good Thing’
Last Wednesday, the US Federal Reserve met to announce the next rate hike and the central bank raised the federal funds rate by 75 basis points. The Fed said last week that it aims to “maximize employment,” and the central bank is still targeting an inflation rate of 2% over the long term. Three-quarters of the percentage point increase is the third consecutive rate increase of 75 basis points. After the 75 basis point increase, the stock markets, cryptocurrencies, and precious metals appear to have rallied in the Fed’s rate hike.
However, the Fed chair also discussed the US housing market this week, and the comments have shaken markets over the past few days. Powell hinted at a real estate correction or a slowdown in home prices to combat inflation to 2% levels.
Powell insisted that “the slowdown in home prices we are seeing should help bring prices more closely in line with rents and other housing market fundamentals – and that’s a good thing”. “In the long run, what we need is for supply and demand to align better, so that home prices rise at a reasonable level, at a reasonable pace, and people can buy homes again,” Powell told the press on Wednesday.
The sixteenth president of the Federal Reserve added:
From a business cycle point of view, this difficult correction should return the housing market to a better equilibrium.
Average 30-year fixed-rate mortgage rate jumps 27 basis points to 6.55%, economist says home prices are still “significantly overstated”
Statistics released by bankrate.com on September 24, 2022 show that the current average for a 30-year fixed-rate loan is 6.55%. Bankrate.com data shows that the 30-year fixed-rate mortgage has jumped 27 basis points in the past seven days. Ten regions in the United States are declining faster than most, according to recent data compiled by real estate firm Redfin. This includes US cities such as Seattle, Las Vegas, San Jose, San Diego, Sacramento, Phoenix, Oakland, Northport, Florida, Tacoma, and Washington.
“The Fed’s shift in word choice from ‘housing needs to reset’ in June to ‘housing reset today actually means a correction’ indicates that they are just fine with falling home prices, declining home sales, and declining construction.” Largely for an investigation, John Burns Real Estate Consulting’s head of research, Rick Palacios Jr., told Fortune on Thursday.
Following Powell’s comment on the housing market, USA Today reporter Terry Collins quoted a number of experts detailing that the US “is definitely in a housing correction with no end soon.” Moody’s Analytics chief economist Mark Zandi told USA Today that he thinks the US housing market is already in decline.
Zandi explained to Collins that more than half of the 400 largest housing markets in the United States are “significantly overstated” by more than 25%. “I think that’s going to continue for the next couple of years, and it will continue into the middle of the decade until things come to an end,” said Moody’s Analytics chief economist.
What do you think of Fed Chair Jerome Powell’s housing correction comments on Wednesday? Do you think the US real estate market will continue to slow down? Tell us what you think about it in the comments section below.
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from San Jose News Bulletin https://sjnewsbulletin.com/fed-chair-jerome-powell-says-hard-correction-must-balance-us-housing-market-bitcoin-news-economics/
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