The housing market may feel out of whack to home buyers coping with fast-rising home prices and 7% mortgage rates. But like it or not, the housing market is in the pink of health.
— Torsten Slok, chief economist at Apollo “The housing market has started to recover, and this is a problem for the Fed because more demand for housing will boost home prices and rents,” Torsten Slok, chief economist at Apollo, wrote in a note in May. And housing is a big part of how the government measures inflation, he added. This will make it more difficult to reduce inflation from 5% to the Fed’s 2% inflation target, he said.
House hunters have adjusted their expectations. But if rates were to jump from 7% today to even higher levels, “I would not be at all surprised if homebuyers stopped abruptly again,” Simonsen said, stating his thesis for the fragility of the sector. Americans broadly expect rates to go over 8%, according to a March survey by the New York Federal Reserve.
“A bottom is forming for single-family home building as builder sentiment continues to gradually rise from the beginning of the year,” said Rob Dietz, chief economist of the NAHB.