(Source: Reuters)
Harsh Grewal and his wife settled on a place in a San Francisco suburb in mid-April, months into an increasingly frustrating house quest, and were preparing a bid, above the advertised price, in the hopes of beating off rival offers in one of the country’s hottest housing markets.
Then he checked his phone, where he saw a slew of alerts boasting lower prices for other homes they’d been following. The Grewals canceled their offer and placed their search on hold in the hopes that the market would settle off. Grewal stated, “I want to watch where this goes and where the dust settles.”
That’s exactly what policymakers at the Federal Reserve are hoping to see more of when they boost interest rates to bring inflation down from its 40-year high.
Borrowing money to buy a property has become more expensive as interest rates have risen. On predictions of quick Fed rate hikes, the yield on the 10-year Treasury note, which serves as a benchmark for mortgage rates, has climbed. According to the Mortgage Bankers Association, the average 30-year fixed home loan rate is currently 5.37 percent, up more than 2 percentage points since the beginning of the year.
So, if a buyer buys a $375,000 existing property in March, they will pay $440 more per month than they would have in December if they placed 20% down.
“The housing market is obviously out of whack,” declared Federal Reserve Chairman Christopher Waller last month.
