Rising Housing Costs Force Federal Reserve to Take Action, Creating a More Balanced Market for Home Buyers and Renters.

The cost of housing has been increasing steadily, and it was identified as the main contributor to inflation in January, according to the Bureau of Labor Statistics. Although the annual inflation rate dropped slightly to 6.4%, the Federal Reserve said they still see areas of concern. They have raised interest rates over the past year and interest rate hikes are expected to continue. The housing market has been facing significant challenges, with new single-family construction projects down 27% from the first month of 2022. The higher mortgage rates and lack of market leverage has not only decreased demand for existing and new homes but also resulted in a longer median expected homeownership for first-time buyers at 18 years. ATTOM Data Solutions reported that in November 2022, only 22 out of every 100,000 housing units were the subject of a foreclosure filing. The inventory supply was at only 2.1 months and sellers realized a profit of $112,000 on the typical sale in 2022, which was a 51.4 percent return on investment compared to the original purchase price. The competition has also become more balanced between buyers and sellers, with more concessions from sellers and more negotiating power for buyers. Apartment List reported that apartment rents in every major metropolitan area dropped 3.5% over the past six months through January, although renters are still paying 20% more for a new lease than before the pandemic. The Federal Reserve's decision to raise interest rates has caused mortgage rates to skyrocket and pushed housing costs to unaffordable levels for many, but mortgage rates have been slowly falling since last fall and the market is achieving stability and could see a rebound in the coming months. The spring buying season is expected to have competition for the best-priced homes, and many homes will require a price cut to get there. Homebuilder confidence rose 7 points to 42 in February, the highest reading since September, and the report predicts that peak mortgage rates have been reached and the market will achieve stability in the coming months.

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