Rising Home Prices Are Clashing With the Slowdown in Economic Growth
Are rising home prices a wild card for the Federal Reserve?
According to an article posted by Bloomberg, the high home prices are a hitch in the Federal Reserve’s plans for the nation’s slowing economy. Many say that this is the worst inflation the country has seen in forty years. The Federal Reserve wants to put a stop to the inflation that is currently hurting our economy.
The change is planned to come around September of this year. The goal is to have its policy rate at a level it considers to be restrictive, putting further downward pressure on prices.
In order for this to happen there are several factors that have to align. The three biggest are the country needs to pay three months of declining core inflation, measured month-over-month, the rate of home price appreciation needs to slow down in market price gauges and energy prices need to stay contained. If this does happen, the Fed will be able to slow the rise in interest rates.
The reason the change will not happen until September or later is that Colin Powell wants to witness a slow down in inflation via several reports. The one thing that will stall this is the housing market. Why? Because housing inflation falls behind market prices by several months.
This means that when market prices slow down, the housing market will continue to rise for several months extending into 2023. The housing market is still going strong because of low invetnory.