Fed Involvement Signals Potential Bad Times for Housing Market
- Author: Bryan Miller
- Posted: 2024-01-12
The housing market in America is shockingly the most volatile of all the markets. You would think that more people would do more to keep the housing market stable, given its vital importance to a society. Even when the economy nose dives and tens of millions are unemployed, or even when America deals with massive food shortages, people having homes is the way people stay alive and pull through these other economic failures. The reason is that shelter is a crucial component to life, and as long as people do have their own homes, they can always grow and raise their own food. Just look back to a time in America pre-Industrial Revolution, and you will find that the vast majority of people grew their own food and taught their own children and weren't nearly as dependent on society as a whole. Those days are obviously gone, and thus America relies so much on its housing market to thrive. The bad news here is that the housing market is looking pretty dangerous right now, and the Federal Reserve (Fed) announced that it would be raising interest rates in order to help provide some stability to the housing market.
What this means is that mortgage lenders are going to find themselves paying higher interest rates on the money they owe, and so those rates are likely going to be passed on to homeowners who are paying down their mortgage loans. So, just be prepared for the fact that you could be paying more to live in your home in the coming months and years. Sadly, this is the exact thing that caused the housing bubble to burst in 2008. When people had to pay inflated interest rates on their loans, they could not make those payments, and so people started defaulted en masse. The government never did step in to bail out individual people who were suffering. They stepped in to prop the corporations back up, and the corporations are once again trying to squeeze every last penny out of people who already can barely afford to live.
The Fed claims that they're stepping in for a "market correction," and no one really knows what that means. The last time they intervened in America for a "market correction," they printed out trillions upon trillions of dollars and saturated the market with so much excess money that inflation in America now is the highest it has ever been in history. When you hear the news say that inflation is the highest it's been in 40 years, what they're leaving out is that it's being calculated by 1980s' standards of inflation. Measuring American inflation in 2022, it has never been this high. The Fed looking to tamper with the housing market is a huge deal that could very easily spell bad news for millions.
The Last Time the Fed Was Involved, Everything Collapsed
If you're a person in America looking to buy a home, looking to sell a home, or you're already worried about your mortgage, you're going to want to keep a close eye on whatever it is the Fed is doing. The last time the Fed dipped its toes into the housing market pool, everything collapsed and half the planet was nearly driven into a depression. The Fed then had to print a bunch of money for stimulus, and America was dealing with high inflation for a few years. It took almost a decade until which point there was some sort of stability and balance in the housing market. Not even a few years after finally finding some stability, the Fed is once again going to tamper with the market. The Federal Reserve is not an elected body. There is no democratic process here. At the behest of politicians, the Fed acts, and the people of America have to deal with the fallout.
For an administration that says the word "democracy" a hundred times every day, and claims it is the most important thing about America, they sure do love to push through these un-democratic things while the rest of us watch and beg them to stop.
There are a whole lot of bad signs looming over the housing market today. Few new homes are being built. Mortgage companies are stingy with their loans. Home prices have soared to record highs. And on and on. Many feel that having the Fed step in for their "correction" is just going to make the problems much worse.
