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For many, this may seem like a bad time to invest money in the purchase of a property, since the cost of borrowing is getting higher and higher. However, lower demand is helping to depress prices.
Decisions made at the Federal Reserve offices in the heart of Washington DC echo even in the humblest Texan home in Escobares City, considered one of the poorest neighborhoods in the world’s largest economy.
The interest rate hike, designed as a bucket of cold water to quench simmering inflation, has pushed the average fixed rate on a 30-year mortgage, which stood at 3.22% a year ago, to higher than last month. 7%, the highest since 2002.
The Central Bank of the United States is getting ready for its last monetary policy meeting of 2022, which will take place between December 13 and 14, and the market’s focus is no longer on whether to continue raising interest rates, but at what pace.
With inflation appearing to be receding, but still well above target, the market expects the world’s central banks to start slowing down their rate hikes, though not removing them.
Analysts are pricing in a half percentage point increase in the policy rate, slightly below recent increases of three-quarters of a percentage point (75 basis points).
A year ago, that intervention rate, which is the rate at which the Central Bank lends money to commercial banks, ranged from 0% to 0.25%. Today it is between 3.75% and 4%, due to the aggressive increases in recent months.
Higher rates, lower prices
As mortgage rates rise, hundreds of dollars are also added to monthly mortgage payments, a hurdle for many prospective homebuyers, resulting in a slowdown in prices.
In October of this year, previously occupied US home sales fell for the ninth straight month and annual sales are advancing at the slowest pace in more than a decade, excluding the pandemic.
Prices, although they have not fallen, have slowed down their growth, which at the beginning of this year was 20% and is now just under 7%, casting doubt on the sustainability of the boom in the once hot real estate market.
In other countries, such as Canada, which for the past 25 years has seen the world’s biggest real estate boom, that boom is in free fall, with benchmark home prices falling across the country for eight straight months. , according to a recent report by the specialized agency ‘Bloomberg’.
With Reuters and AP
