This seems to be the question on everyone’s mind as of lately. With all of the uncertainty within the US economy, especially with the Federal Reserve aka “The Fed” raising the federal fund rate which is the rate at which federally insured banks borrow money from each other overnight to cover short-term funding operations. Although the Fed does not set mortgage interest rates it does exert influences over the credit markets like mortgages and auto loans. Mortgage interest rates are almost double what they were six months ago. Add in the Geopolitics ie “The War in Ukraine” and the recent bank failures of Silicon Valley Bank and Signature Bank, it sure does look like it’s happening all over again…. So much so you may be reminiscing about 2008 and it’s aftermath that look almost a decade to recover from. But before reliving that pain, let me explain.
What’s really happening is a rapid decline in demand for housing due to an environment of increased mortgage interest rates.
Classic supply and demand scenario….
The supply ie. existing homes and new construction starts. The demand ie. new mortgage loans and investment capital.
Why is this happening and why now? Perhaps inflation is the culprit or perhaps it’s the result of low interest rates and low inventory that fueled the unsustainable home price appreciation.