By Christopher Anstey via Yahoo Finance
(Bloomberg) — Federal Reserve Chair Jerome Powell warned that the US housing market is likely to suffer a reversal in the wake of policy makers’ interest-rate hikes.
“We’ve had a time of a red-hot housing market all over the country,” Powell said in a press conference after the Fed’s policy decision on Wednesday, in which the central bank raised interest rates by another 75 basis points.
“The deceleration in housing prices that we’re seeing should help bring prices more in line with rents and other housing-market fundamentals. And that’s a good thing,” Powell said.
US mortgage rates have climbed to the highest since 2008 in response to the Fed’s monetary tightening, with average 30-year fixed-rate home loans reaching 6.25% last week. While home-price gains remain high on a year-over-year basis, they have been decelerating.
Home sales have been declining as high borrowing costs and elevated prices compound affordability challenges, weighing on demand. A report earlier Wednesday showed sales of previously owned US homes fell for a seventh straight month in August, the longest streak since 2007, and builder sentiment has dropped every month this year in a record slide.
A report Tuesday showed that new-home construction unexpectedly rose in August. Still, a drop in building permits showed how residential construction is coming under pressure.
“We’ve probably in the housing market got to go through a correction to get back” to a place where supply and demand are better aligned, price gains are “reasonable” and people can afford properties, Powell said on Wednesday. Property prices “were going up at an unsustainably fast level.”
However, it will take a while for home prices and rents to cool more significantly, Powell said.
“Shelter inflation is going to remain high for some time,” Powell said. “Hope for the best, plan for the worst.”
More From The Real Estate Guys…
- Sign up for The Real Estate Guys™ New Content Notifcations
- Check out all the great free info in our Special Reports library.
- Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
- Stay connected with The Real Estate Guys™ on Facebook, and our Feedback page.
The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.
Subscribe
Broadcasting since 1997 with over 600 episodes on iTunes!
Love the show? Tell the world! When you promote the show, you help us attract more great guests for your listening pleasure!