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Industry Leaders Warn of Economic Risks Caused by Soaring Mortgage Rates

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Housing Policy + Finance

Industry Leaders Warn of Economic Risks Caused by Soaring Mortgage Rates

Three industry giants recently addressed Federal Reserve Chairman Jerome Powell to warn of the adverse effects ongoing interest rate hikes could have on the housing market

October 11, 2023
Gargoyles on the exterior of the Federal Reserve building
Image: Aaron Kohr / stock.adobe.com

The National Association of Realtors (NAR), the National Association of Home Builders (NAHB), and the Mortgage Bankers Association (MBA), recently addressed a letter to Federal Reserve Chairman Jerome Powell expressing concerns about ongoing interest rate hikes. The three organizations contend that the Federal Reserve’s actions to cool the housing market have instead led to market instability, exacerbating housing affordability issues and causing setbacks in the real estate market. 

As mortgage demand drops and 30-year fixed-rate mortgages reach 7.49%, fears of rates possibly reaching 8% have escalated and market watchers are closely monitoring the Federal Reserve's next steps, which will likely affect the real estate market's performance into 2024, NAR reports.

The CPI continues to show high shelter costs, which many blame for keeping inflation elevated. In July, shelter inflation was attributed to 90% of the gain in consumer prices. “The most effective approach to tame shelter costs, and assist on the broader inflation fight, is to facilitate the construction of attainable, affordable housing,” the housing groups’ letter to Powell states. “Sustained wide spreads or further increases in interest rates make this economic goal more challenging by limiting lot development and home construction, exacerbating housing supply and pricing out millions of households from the goal of homeownership.”

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