How Bidenomics Paralyzed the Housing Market With Worst Mortgage Mess in 20 Years

[Kamaji]

How Bidenomics Paralyzed the Housing Market With Worst Mortgage Mess in 20 Years

Spencer Brown
August 18, 2023

After his economic agenda sent inflation soaring to 40-year highs and triggered more than 24 consecutive months of negative real wages for Americans, the Federal Reserve engaged in the most aggressive interest rate hikes in decades as part of its so far unsuccessful attempt to cause deflation.

Now, those interest rate hikes have landed a direct hit on the housing market, sending mortgage rates to their highest level in more than 20 years, more than seven percent, according to a new national average released by Freddie Mac.

As The Wall Street Journal explained:

The increase extends a lengthy stretch of high borrowing costs that has slowed the housing market to a crawl. This marked the first time since last fall that the rate on a 30-year, fixed-rate mortgage rose above 7%. A year ago, rates were around 5%.

The housing market is the part of the economy hit most directly by the Federal Reserve’s high-rate policies. The resulting slowdown in refinancing and purchase activity has battered some mortgage lenders, leading to tens of thousands of layoffs in the industry and weighing on economic growth.

Mortgage rates aren’t directly tied to the central bank’s moves. But they tend to move loosely with the 10-year Treasury yield, which on Thursday hit its highest level since 2007. Some analysts see ample room for the 10-year yield to keep climbing as markets brace for the possibility that rates aren’t going to decline soon.

In a reality similar to that faced by anyone foolish enough to buy the Biden administration's now years-old initial claim that inflation was merely "transitory" and a positive sign of economic recovery, WSJ said "the rising cost of borrowing to buy a home was expected to be temporary" when the Fed first began what turned into a full year of consecutive interest rate hikes. "Now, buyers, sellers, investors and real estate players are adjusting to the idea that higher rates are here to stay, or at least here to stay longer than they were expecting," the Journal reported.

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Source:  https://townhall.com/tipsheet/spencerbrown/2023/08/18/bidenomics-hits-the-housing-market-paralyzing-buyers-and-sellers-n2627220

[SZonian]

"It's just transitory." 

[Fishrrman]

Mortgage rates around 5-7% are NOT "a mess".

Rather, they are quite normal, and where mortgages should be.

If they stay there, it will force selling prices down to realistic levels, not at the highly inflated levels they rose to when mortgages could be had at 4% or less.