In the wake of the Fed’s decision to raise interest rates, many predicted a housing market crash with 20% drops in pricing. However, these predictions have yet to materialize as year-over-year housing prices have continued to rise in 2022 and 2023. A short period between July and the end of the year saw minor price declines, but they have since rebounded.
Mortgage bonds had a good day following the Fed’s decision, as many believe the Fed may be going too far and potentially sending the economy into a recession. This belief has been good for bonds, and data from various sources such as FHFA, CoreLogic, Black Knight, and Zillow show that housing prices are recovering and accelerating.
With interest rates potentially declining into the summer, housing prices could continue to rise, and inventory may become even tighter. Bidding wars are already beginning in many areas, and as rates come down, prices will likely accelerate.
Despite Fed Chair Jerome Powell denying any possibility of rate cuts this year, the market doesn’t believe him, and Fed futures are pricing in more than three rate cuts by the end of the year. Powell insists that the US banking system is strong and resilient, but recent large bank failures tell a different story.
While some areas of the country are experiencing stronger or weaker numbers, national data supports the idea that the housing market is not headed for a crash. It is thriving despite the Fed’s rate hike decisions and recession fears.
