Inflation Wreaks Terror
In the past two weeks, the Fed’s hawkish warnings over inflation’s relentless impact on several industries carried markets to a halting stop. Although investor sentiment is now fairly positive, the Fed’s predictions have come true in the blemished housing industry. Exactly one year ago, median home prices peaked at $413,800, the same period where inflation reached a 40-year high at 9.1%. Now, for April of 2023, home prices are lower than the previous year’s peak but continue to steadily climb to the current median home price of $388,800, 2.4% lower year-over-year. For three straight months leading into April, existing home prices have climbed rapidly, with major metropolitan areas like Miami, Chicago, and Atlanta contributing heavily.
This upswing in prices isn’t the only factor plaguing the expensive housing industry. The average interest rate on 30-year fixed-rate mortgages remains twice as high as it was just two years ago. The national average remains just above 7%, having the potential to grow higher as the Federal Reserve contemplates hikes in the federal funds rate. On the bright side, the resiliency of the consumer has shocked several throughout the current year. Despite higher mortgage rates and home prices, existing home sales had grown 0.2% month-over-month in May, with May’s new home sales totaling roughly 90,000 more than forecasted. With the housing market contributing to almost one-fifth of US GDP, investors should pay close attention to the first-quarter GDP figures slated to release on Thursday.
Want to learn how to invest? Download the Invstr app, where you can play Fantasy Finance and manage a virtual investment portfolio or open a brokerage account and invest for real. Take our interactive investing course on Invstr Academy and become a better investor today!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.