The Federal Reserve Hikes Their Fed Funds Rate to Expectation, Leading The Bond Market to Instill Further FUD....
Let me preface by saying, I will always provide a no BS point-of-view of the real estate market here in Atlanta. While this week's update is far more macro than Atlanta, it still serves my point. While some will blow smoke to obtain the now business, I believe most, if not all of you are smart enough to see through the BS, so why sugarcoat anything... Let's get into it!
The FED hiked their "terminal federal funds rate" by the tune of 0.75% or 75 basis points. This was expected by an overwhelming majority of the market. I will preface again by saying this doesn't directly up mortgage rates by 75 basis points. This can affect the 10-year treasury bond, which will indirectly affect mortgage rates. What scared the crap out of markets, many believe to be the fact that the FED might potentially be tightening too fast. Monetary policy like this can take 6-8 months to take effect in the inflation numbers. If the FED over does it, they risk sending the economy into a depression. No not a recession, a depression (4 quarters of negative GDP growth).
What does this mean for real estate? That is hard to predict, and by no means am I trying to predict market outcomes. However, higher mortgage rates will no doubt sap buyer demand, as it already has. The Atlanta market had a lot of excess demand. While a lot of that has been brought back to reality, desirable areas still retain relatively strong levels of demand.
Like I have said many times before, NO this is not 08. Not the same economic factors whatsoever. However, will there be a further slowdown? The answer is, most likely so! The question is, by how much? These past 18 months or so have led people to believe that real estate grows like crypto, & that could not be farther from the truth. Real estate is mundane & slow, and it needs to return to normalcy. It will return to normalcy.
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