Fed Feeds Rate Hike, Home Sales Tumble

Bad news, bad news: Fed raised its interest rate another 75 base pts Wednesday while Nat’l Assn of Realtors said its pending home sales index tumbled 20% in June – “far more than 1.5% drop projected”.

As noted by Fox Business, the Fed’s latest interest rate hike designed to bring “scorching hot” inflation under control will likely “push the benchmark federal funds rate to a range between 2.25% and 2.50%, the highest since the COVID-19 pandemic began two years ago. Currently, 30-yr mortgages are in the 5.5+% range.

Combined with lingering high home prices driven up in recent months by a seller’s market, the anticipated higher borrowing costs also likely means much more cooling off in the “interest rate-sensitive housing market”. If June saw a 20% drop in signed contracts to buy previously owned homes compared to a year ago this date, it doesn’t take a crystal ball to assume even more entry-level consumers will be pushed out of the market in the coming weeks. Prices to take a tumble next?

Davd Soul