Does Feds Rate Hike Affect Housing Market

Does Feds Rate Hike Affect Housing Market and Mortgage Rates

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this breaking news article about the recent federal reserve meeting, we will cover and discuss does the Feds Rate Hike Affect Housing Market and Mortgage Rates? What should we expect after the most recent federal reserve meeting on them hiking interest rates by 75 basis points. Mortgage rates were just under 3.0% on a 30-year fixed-rate mortgage just a little over a year ago.

How Does Feds Rate Hike Affect Housing Market and Home Prices

Today 30-year fixed-rate mortgage rates is north of 6.5% costing discount points. Despite the increasing mortgage rates, the housing market remained strong with prices still increasing all year. However, does Feds rate hike affect housing market this time around? Mortgage rates are still skyrocketing and what does Feds rate hike affect housing market in the months to come. In the following paragraphs, we will cover the topic of does Feds rate hie affect housing prices and how much higher can mortgage rates go.

Does Feds Rate Hike Affect Housing Market This Time?

As you more than likely know, the federal reserve has increased interest rates yet again. On Wednesday, September 21, 2022, the federal reserve announced they will raise interest rates an additional three-quarters of a percent (.75%). This is a bold attempt to cool down the hottest inflation numbers the United States has seen in four decades. In this blog, we will give some market updates and advice to purchase a home in these crazy times.

Will Feds Rate Hike Slow Inflation?

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Inflation has hit every sector of the United States economy. Unfortunately, inflation has hit many countries significantly harder than the United States. After Wednesday’s federal reserve meeting, the Fed decided to lift interest rates for the fifth time since March of this year. This 75 basis point rate hike is a dramatic step in the attempt to slow inflation.

Feds Attack Inflation With Another Steep Rate Hike

Inflation nearly started to slow in July, but in August, prices rose 8.3% year over year. This data is from the consumer price index report from last week. Unfortunately, high inflation makes it difficult for Americans to afford basic essentials like housing, fuel, and groceries. Since housing is our main point of focus in this article, the federal reserve decides to raise interest rates ultimately attempting to stabilize rapidly rising home prices. Higher interest rates make it less enticing to borrow money.

Does Inflation Lead To Higher Home Prices?

During 2020 and 2021, we saw home values rise to historic levels. Many experts believe the historically low-interest rates during those years helped drive up the cost of housing. Americans had access to incredibly low mortgage rates which helped them purchase a more expensive homes.

Now we are dealing with a catch-22, as home values are still extremely high and interest rates are higher than they have been in 14 years, many Americans are now unable to afford a mortgage. The federal reserve is doing all it can to reduce the consumer demand for goods and services. The ultimate goal is to stop prices from growing so quickly if demand is able to be dampened down.

Does Feds Rate Hike Affect Housing Market For Past Five Increases?

As a consumer, have you seen prices drop with the five interest rate hikes since May 2022? I must say, I personally don’t feel that these rate hikes have helped curb inflation to this point. Based on the 12-month changes from the consumer price index figures released last month, food costs have increased 11.4%, and energy costs are up 23.8% (year over year). Food and energy costs are basic functions of everyday living. As an American citizen, it is tough to see how much my utility bills have increased.

Skyrocketing Cost of Goods and Services

Every time you go to the grocery store, your bill seems to increase. While the cost of gasoline has decreased from historic highs, the average cost for consumers is still through the roof when filling their tanks. Americans seem to be getting hit from every direction. It may get scarier, considering many experts think we need a higher unemployment figure and multiple more rate hikes are needed in order to put an end to the inflation figures we are currently dealing with.

How Does Inflation Affect Home Prices

Even after these fed rate hikes, do you think prices will drop? As an everyday consumer of goods, I am not hopeful. I feel like these inflation figures have become part of our life, and Americans are now used to paying more for items such as clothing, groceries, gasoline, and utilities. Many corporations have reported record-breaking years for profit as the American people suffer.

Does Inflation Lead To Higher Home Prices?

Many sectors of our economy are running on minimal employees working crazy hours to keep their businesses afloat. The hard-working employees are sacrificing their work-life balance in order to set these record profits. While the railroad strike may have recently been avoided, they simply kicked the can down the road. Hopefully, the railroad employees are able to negotiate a fair contract so they can enjoy their lives and families. There is no one simple solution or I feel like we would have started to pull out of this record inflation by now.

Is It Good To Own Real Estate During Inflation?

How rate hikes specifically affect the housing market. It is no secret that the rising interest rates have slowed the housing market. Each time the federal reserve increases interest rates, we have seen the demand in the housing market slow down. The housing market is slowing by the number of homes being sold as well as home values slowing in appreciation.

Housing Market Forecast During Inflation

Many experts predict home sales will be down nearly 20% by the end of the year and expect slower home sales throughout the first half of 2023. Higher interest rates come with higher monthly payments. Since many home buyers are payment-conscious, sellers may be forced into lowering the price of their homes to make the sale.

Historic Rapid Inflation Causing Fears Among Americans

We are in unprecedented times, so it is hard for experts to analyze the current market. The last time we saw rapid inflation like this was during the 1980s when mortgage rates were over 17%. And even in those times, Americans still purchased homes. A decade later, during the 1990s, interest rates were in the high single digits (around 9%), and Americans were still purchasing homes.

Is It Safe To Buy a Home During a Period of High Inflation?

It is safe to say that even with high home prices and high-interest rates, some Americans are still going to be in the housing market for several reasons including growth in family size, a job change, relocation due to family, or other personal reasons. And while the federal reserve does not set mortgage interest rates directly, when they raise the short-term rates, mortgage interest rates follow.

Does Feds Rate Hike Affect Housing Market and Refinance Market

The refinance opportunities are pretty much out the window, and the home purchase demand has moderated. There is significantly more housing inventory on the market today which is rapidly turning the real estate market from a sellers’ market to a buyers’ market.

Does Feds Rate Hike Affect Housing Market For First-Time Homebuyers

What do Gustan Cho Associates recommend for buyers in today’s housing market? We recommend you work with a highly skilled mortgage team who can effectively get your file to the finish line on time. Gustan Cho Associates are made up of expert loan officers who are here to assist your mortgage needs. We have highly competitive interest rates which will increase your buying power.

Best Mortgage Loan Program During Times of High Inflation and High Rates

We have seen the adjustable-rate mortgage programs come back into play. But we don’t necessarily suggest using an adjustable-rate mortgage. While the initial payment may sound enticing, it can be a trap. An adjustable-rate mortgage typically saves you about half a percent of interest for the first five years, but then you are at the risk of the market.

Adjustable-Rate Versus Fixed-Rate Mortgages During Times of Rising Rates

One more thing to consider about adjustable-rate mortgages is how many times the rate may adjust. The old-school adjustable-rate mortgage that helped create the housing bubble in 2008 had adjustments every year. New adjustable-rate mortgage programs now adjust every six months, which can put you in a bad situation down the road. So, if a fixed-rate mortgage payment is in your wheelhouse, we always suggest the less risky route. Of course, no two situations are the same, and our team of experts is here to help you in any way possible.

Should You Do Cash-Out Refinance As Rate Rise?

Keep a cash-out refinance in mind. If you have not refinanced your home in the past few years, you more than likely have a decent chunk of equity in your home. If you find you have built up consumer debt over the past few years, you may be able to utilize the equity in your home to lower your overall monthly payments.

Should Homeowners Cash Out Refinance To Pay High-Interest Debts?

In times of high inflation, saving money is very important. Credit card debt can snowball out of control very quickly. If you choose a cash-out refinance, your rate on your mortgage may increase, but your total monthly bills will decrease. Turning your current consumer debt into tax-deductible mortgage interest can save you a lot of money. Our loan officers are experts in cash-out refinance options and can offer you a free quote. To see if a cash-out refinance makes sense in your situation, please call Mike Gracz at (800) 900-8569 or email your information to

Does Feds Rate Hike Affect Housing Market and New Home Buyers?

Is it still a good time to purchase a house? Everybody’s situation is slightly different, but this can still be a great time to purchase a home. While we haven’t seen home values significantly drop, we have not seen the rapid appreciation in years past. Meaning you may be able to get in at a good time. Many experts agree that home prices will continue to increase but at a much lower rate.

Most experts feel we are not going to see a real estate crash as we did in 2008. That being said, if you can comfortably afford the payment today, locking into a 30-year fixed rate is always a good choice. If you are a renter, you know that every year your landlord has the ability to raise your housing costs. If you are locked into a 30-year mortgage, the only way your payments will increase is if your taxes and insurance increase.

Will Rents Increase During Times of Inflation?

If you are renting a home, and property taxes and or insurance increase, those costs will be passed down to you. Many consumers are buying a home in today’s market with the assumption they will refinance their house in the future when interest rates dip. While this is a good strategy, we stress to our clients that they need to be prepared to pay their current interest rate for the foreseeable future. There is no crystal ball, and nobody knows if and when rates will decrease again.

Are We Headed Towards a Buyer’s Market Due To High Rates?

Gustan Cho Associates have firsthand accounts of buyers getting a good deal on a home. Recently, we had clients who were able to purchase a home with a great deal because the housing market is flipping back to a buyers’ market. This may help increase your chances of getting seller-paid closing costs and keeping more money in your pocket.

How Does Inflation Affect Mortgage Rates?

Buying a home is a long-term decision, and you want to make sure you purchase a home that will best fit your needs. Our team of experts is ready to assist you with the pre-approval process and even has the ability to lock in your interest rate while you are shopping for a home. Please call us for more information on locking your interest rates during the home shopping process as not every program allows this unique opportunity.

Getting Pre-Approved During Times of Rising Mortgage Rates

Gustan Cho Associates are experts in mortgage lending and are constantly monitoring the real estate market. It is our job to keep our clients up to date on the ever-changing guidelines, mortgage programs, and market conditions. We know we are in for some tough financial times. The United States government under the Biden administration has signaled to American consumers that tough times are on the horizon. Hopefully, we can bounce back sooner than later, but we encourage our readers to prepare for the worst. Locking yourself into a 30-year mortgage can be a great opportunity to stabilize your monthly finances. Whether you are in the market to purchase or refinance a home, please reach out to the experts at Gustan Cho Associates today. We look forward to assisting you.

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