Quote from Savings Beagle on April 20, 2022, 11:08 am

The National Association of Realtors recently estimated that roughly 9 million homebuyers have been priced out of the housing market.

That would not surprise me one bit considering the greatly inflated pricing on homes around the U.S. and the significant jump in mortgage rates from about 3% early in 2022 to over 5% now thanks to the Federal Reserve Bank finally making efforts to normalize interest rates.

If you've read any of our economics-related pieces, you know we don't hold back when blaming the Federal Reserve Bank for the financial predicament the U.S. is in.  The Fed held interest rates too low for far too long while pumping money into the system by buying U.S. Treasury's and mortgage-backed securities in an effort to pump up, and keep pumped up, the U.S. economy. 

Which it did until inflation reared its ugly head.

And now the Fed is in a pickle as to what to do.

It has to raise interest rates to stave off greater inflationary moves, but in so doing, it will negatively affect the economy by raising borrowing costs in a number of areas.

Mortgages being primary, as we've seen with the large jump in rates the last few months.

Some may say, "no big deal, it just impacts the budgets of those who want to buy a house."  That's true, to a certain extent. 

But what is not often considered is how large a contributor housing is to the overall economy.  Think of everything that goes into building or buying a house.  The banks, materials companies for building or remodeling, appliance manufacturers/sales, lawn and garden operations...the list is long.  Every time a house is built/sold, all of those entities benefit.  The same goes for existing home purchases.  Who ever just buys a house and moves in without spending at least a little extra to fix it up the way they want it?  All of those purchases benefit businesses and the overall economy.

With all-time-high home prices and increased mortgage rates contributing to a greater slowdown in the housing market, we need to watch how that will affect the larger U.S. economic picture in the coming year.

You can read the full article "Nine Million Americans Priced Out of Housing Market As Affordability Crisis Worsens" by Tyler Durden/Zero Hedge at this link.