In order to decrease inflation, the Federal Reserve sets policies that drive mortgage prices up, which reduces the number of homebuyers and slows the housing market. However, as economic data comes in, Fortune.com reports that financial markets are expecting a 2023 recession, which would drive mortgage rates lower. While lower mortgage rates can help formerly priced out homebuyers get back in the market, if they fear losing their jobs, they will not be buying new homes. The Federal Reserve remains a wild card in all these calculations. If mortgage rates get too low, it will start raising rates, which leaves the housing market in flux.
“Whether we are technically in a recession or not doesn’t change my analysis. I’m focused on the inflation data...And so far, inflation continues to surprise us to the upside," Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told CBS on Sunday. "We are committed to bringing inflation down, and we're going to do what we need to do."
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