Restrictive Policies
We’ve seen the housing market start to cool off, but it finally feels as if it’s returning to Earth. Conditions for the last two years have been perfect for homeowners across America, but a big part of that has to do with inflation, which is once again affecting a key part of our economy. We’ve discussed the whole chain of events that has caused this, but Jerome Powell and the Federal Reserve’s decision to increase interest rates has reversed this.
Data shows that last week, mortgage applications fell to their lowest level in more than two decades, with high interest rates dissuading people from refinancing their loans. Additionally, existing home sales slowed to pandemic levels due to higher borrowing costs involved with loans nowadays.
In addition to economic issues in the housing market, the broader economy may be seeing even more interest rate hikes. Indeed, Fed officials have expressed optimism about the longer-term path of the economy, though they did lower GDP forecasts sharply to 1.7% in 2022 from a previous estimate of 2.8% in March. Moreover, the Feds have reported consumer sales slowing and businesses holding back on investments due to rising costs. Indeed, the war in Ukraine and the ongoing supply chain bottlenecks have also been cited as concerns.
What do you think about the state of the economy and could we see rate hikes again?
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.
