The Mortgage Bankers Association joined The National Association of Realtors to officially ask the Federal Reserve not to consider further rate increases. Additionally, the group of associations asked for the Fed not to sell its mortgage securities holdings.
The real estate industry and consequently the mortgage industry are suffering due to the shortage of homes on the market. The letter mentions “ongoing market uncertainty” fueled by unclear direction the Fed plans to take in the coming weeks and warns of a potential hard landing.
The Fed has raised the key borrowing rate eleven times in eighteen months. The Fed has not shown signs of easing interest rates, but perhaps the message will impact further rate hike considerations.
Sales volumes on real estate are at record lows due to the inventory constraints. Americans are not willing to move and face a higher interest rate environment.
Since the environment is unchartered territory, it is difficult to see the long term impact on housing prices. Either way, real estate and lending are major employers in the United States economy and workers in the field are getting hit by a shrinking market. With 30 year mortgages climbing to 8%, new mortgage applications will not increase anytime soon, and the refinancing market has been absent for a number of years now.
The letter notes that the rate hikes have “exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume. These market challenges occur amidst a historic shortage of attainable housing.”
The Fed has yet to comment on the letter.
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