On Wednesday, the US Fed Chair Jerome Powell had raised an alarming bell for US housing market, which has been lavishly languishing over recent months in the wake of an unfathomable scale of hawkish stance from the US Fed.
In the matter of the fact, latest remarks from the US Fed Chair Jerome Powell came forth shortly after the US Fed had announced a 75 bps (basis percentage point) rate-hike following a two-day long policy meet. Aside from that, the US Fed also had forecasted that the US Central Bank’s benchmark borrowing cost might hit as high as 4.40 per cent by early-2023, as the US Federal Reserve’s bet on a rate-hike cycle to tame a teetering inflation-surge appeared to be failing.
Last month, US Consumer Price Index rose by 0.1 per cent compared to a month earlier despite a rate-hike a month earlier, while on a year-on-year basis, US inflation soared by 8.6 per cent over past twelve months through August.
Fed’s Powell says US housing market heads towards a correction
Nevertheless, speaking in a press briefing following US Fed’s decision to hike rate between a range of 3.00 per cent to 3.25 per cent, Powell said, “There was a big imbalance ...
housing prices were going up at an unsustainably fast level. For the longer term what we need is supply and demand to get better aligned so housing prices go up at a reasonable level, at a reasonable pace and people can afford houses again.
We probably in the housing market have to go through a correction to get back to that place." According to US mortgage buyer Freddie Mac, US 30-year fixed rate long-term mortgages had spiked to 6.43 per cent last week, while further increase in interest rate from the US Fed would heighten up mortgage rates further while pushing the housing market into a “correction” territory.
Usually correction in a housing market means a decline in sales between 10 per cent to 20 per cent.