{"id":23375,"date":"2024-03-14T14:05:23","date_gmt":"2024-03-14T14:05:23","guid":{"rendered":"https:\/\/www.anthonydidonato.net\/wordpress\/?p=23375"},"modified":"2024-03-14T14:05:23","modified_gmt":"2024-03-14T14:05:23","slug":"feds-aggressive-rate-hike-may-influence-shrinking-buyer-pool","status":"publish","type":"post","link":"https:\/\/www.anthonydidonato.net\/wordpress\/feds-aggressive-rate-hike-may-influence-shrinking-buyer-pool\/","title":{"rendered":"Fed\u2019s Aggressive Rate Hike May Influence \u2018Shrinking Buyer Pool\u2019"},"content":{"rendered":"\n

The Federal Reserve\u2019s move to raise its benchmark rate by three-quarters of a percentage point\u2014the largest increase since 1994\u2014could put more upward pressure on near-6% mortgage rates and sideline more home buyers, says NAR Chief Economist Lawrence Yun.<\/p>\n\n\n\n

The Federal Reserve unleashed another hike to its short-term benchmark rate Wednesday. The increase, the Fed\u2019s largest since 1994, likely will have an impact on the housing market, economists say. The Fed\u2019s key rate often influences mortgage rates, though it doesn\u2019t directly affect them. Rates are moving at a much faster clip than most housing analysts forecast.<\/p>\n\n\n\n

On Wednesday, the central bank\u2019s Federal Open Market Committee voted to increase its benchmark funds rate by three-quarters of a percentage point to help tame inflation, which is at a 40-year high. Banks use the Fed\u2019s rate as a benchmark for what they charge one another for short-term borrowing. The Fed\u2019s latest hike sets a \u201cbig increase in interest rates and means several more rounds of rate hikes are on the way in upcoming months,\u201d says Lawrence Yun, chief economist of the National Association of REALTORS\u00ae.<\/p>\n\n\n\n

So far this year, the short-term Fed funds rate has jumped by 175 basis points. The 30-year fixed-rate mortgage has jumped even more\u2014by nearly 300 basis points. For a $300,000 mortgage, the monthly payment has increased from $1,265 in December to $1,800 today, Yun says.<\/p>\n\n\n\n

\u201cThat\u2019s painful and, consequently, will shrink the buyer pool,\u201d Yun says. \u201cHome sales have recently been trending down toward 2019 figures. Sales could fall even further, with some inventory sitting on the market for more than a month like in pre-pandemic days. Pricing a listed home properly will, therefore, be the key to attracting buyers.\u201d Mortgage rates will stabilize when consumer price inflation starts to fall, Yun adds.<\/p>\n\n\n\n

Rising Mortgage Rates<\/h4>\n\n\n\n

Last week, the 30-year fixed-rate mortgage averaged 5.23%, according to Freddie Mac<\/a>. A year ago, rates averaged 2.96%. By some measures, mortgage rates were just shy of 6%\u2014at 5.99%\u2014on Wednesday, according to Bankrate.com\u2019s national survey. \u201cConsumers haven\u2019t seen mortgage rates above 6% since 2008,\u201d Greg Schwartz, CEO and founder of mortgage lender Tomo, told Bankrate.com. \u201cThe pace of this move is what\u2019s most concerning, as consumers\u2019 buying power evaporated quicker than any time in recent memory. Further, volatility in rates may not decrease anytime soon either.\u201d<\/p>\n\n\n\n

Ali Wolf, chief economist at Zonda, offers an example of the impact: Affording a $316,000 home with a mortgage rate of 6% is about equal to paying for a $450,000 home with a 3% rate.<\/p>\n\n\n\n

More aspiring home buyers are getting priced out. In response, mortgage applications, a gauge of homebuying demand, have been falling by double-digits<\/a>. \u201cMortgage rates going forward will continue to be responsive to changes in expectations around the Fed\u2019s policy path as well as inflation expectations,\u201d says Ruben Gonzalez, chief economist for Keller Williams. \u201cThe housing market is still extremely tight, with inventory levels remaining near historic lows, leaving room for the market to absorb falling demand.\u201d<\/p>\n\n\n\n

The Fed committee hopes its more aggressive approach will help lessen inflation. \u201cClearly, today\u2019s 75-basis-point increase is an unusually large one, and I do not expect moves of this size to be common,\u201d Fed Chairman Jerome Powell said at a news conference Wednesday. Still, Powell said he expected the Fed\u2019s July meeting to see another increase of 50 or 75 basis points, but he said decisions will be made \u201cmeeting by meeting.\u201d<\/p>\n\n\n\n

Nevertheless, the committee still appeared optimistic about the economy. \u201cOverall economic activity appears to have picked up after edging down in the first quarter,\u201d the committee said in a statement. \u201cJob gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply-and-demand imbalances related to the pandemic, higher energy prices and broader price pressures.\u201d The committee is forecasting inflation to move significantly lower in 2023.<\/p>\n\n\n\n

\u00a9National Association of REALTORS\u00ae
Reprinted with permission<\/p>\n","protected":false},"excerpt":{"rendered":"

The Federal Reserve\u2019s move to raise its benchmark rate by three-quarters of a percentage point\u2014the largest increase since 1994\u2014could put more upward pressure on near-6% mortgage rates and sideline more home buyers, says NAR Chief Economist Lawrence Yun. The Federal Reserve unleashed another hike to its short-term benchmark rate Wednesday. The increase, the Fed\u2019s largest … <\/p>\n

Continue reading<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16,8],"tags":[5,32,4,9],"class_list":["post-23375","post","type-post","status-publish","format-standard","hentry","category-news","category-real-estate-tips","tag-anthony-didonato","tag-news","tag-real-estate","tag-tips","item-wrap"],"yoast_head":"\nFed\u2019s Aggressive Rate Hike May Influence \u2018Shrinking Buyer Pool\u2019 - Real Estate Agent and Sales in PA - Anthony DiDonato Broomall, Media, Delaware County and surrounding areas in Pennsylvania<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.anthonydidonato.net\/wordpress\/feds-aggressive-rate-hike-may-influence-shrinking-buyer-pool\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.anthonydidonato.net\\\/wordpress\\\/feds-aggressive-rate-hike-may-influence-shrinking-buyer-pool\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.anthonydidonato.net\\\/wordpress\\\/feds-aggressive-rate-hike-may-influence-shrinking-buyer-pool\\\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"http:\\\/\\\/www.anthonydidonato.net\\\/wordpress\\\/#\\\/schema\\\/person\\\/964792b6994e8cc4cbddc36ad4824908\"},\"headline\":\"Fed\u2019s Aggressive Rate Hike May Influence \u2018Shrinking Buyer Pool\u2019\",\"datePublished\":\"2024-03-14T14:05:23+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.anthonydidonato.net\\\/wordpress\\\/feds-aggressive-rate-hike-may-influence-shrinking-buyer-pool\\\/\"},\"wordCount\":657,\"publisher\":{\"@id\":\"http:\\\/\\\/www.anthonydidonato.net\\\/wordpress\\\/#\\\/schema\\\/person\\\/964792b6994e8cc4cbddc36ad4824908\"},\"keywords\":[\"Anthony DiDonato\",\"News\",\"Real Estate\",\"tips\"],\"articleSection\":[\"News\",\"Real Estate Tips\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.anthonydidonato.net\\\/wordpress\\\/feds-aggressive-rate-hike-may-influence-shrinking-buyer-pool\\\/\",\"url\":\"https:\\\/\\\/www.anthonydidonato.net\\\/wordpress\\\/feds-aggressive-rate-hike-may-influence-shrinking-buyer-pool\\\/\",\"name\":\"Fed\u2019s Aggressive Rate Hike May Influence \u2018Shrinking Buyer Pool\u2019 - 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