Fed rate hikes threw cold water on red hot housing market…is there a silver lining for Michigan homebuyers?
Since the beginning of the year, the Federal Reserve has embarked on an aggressive fight against inflation that has seen the Fed funds rate (the Fed’s preferred interest rate setting tool) leap from nearly zero to 3.75% with an expectation of a further hike to 4.25% before the end of the year. This chart shows the hikes that have taken place so far in 2022. The pace and severity of the hikes is unprecedented, as the Fed moves from a historically accommodative monetary policy adopted to gird the US economy during the COVID pandemic to a restrictive policy designed to pop the inflation bubble and put the brakes on a US economy that had become overheated and frankly, irrational in certain sectors. Nowhere was that more evident than the US housing market. Since the start of the Covid-19 pandemic the median sales price of a single-family home in the US rose from $322,600 to $454,900 as of June 30, 2022. This 40%+ increase in home prices was driven by several factors, including ...