With inflation stubbornly high, the Federal Reserve is pumping the breaks on the economy by raising interest rates. The reasoning is when interest rates rise, demand wanes, activity slows, and prices start to moderate — and then eventually fall.Unfortunately for the central bank, inflationary cycles are tough to break, and rising rates take a while to filter through the economy.
That scenario played out in the broader economy, as consumers unleashed their pent-up demand and drove prices higher, first in the goods part of the economy and now in the services side. Higher rates and prices have put the recent real estate acceleration into neutral. According to Redfin, “Housing-market activity is plunging further this fall than it did over the summer as mortgage rates near 7%…Price drops have reached a record high, and home sales and new listings are dropping.” The National Association of Realtors reported Existing Home Sales slid in September and are down 23.8% from a year ago.