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The Rent Is Too Dang High. Fed Cruises U.S. Towards Housing Catastrophe [1]

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Date: 2022-09-13

Feds are all but certain to raise interest rates by three quarters of a percent at their next meeting.

Today the inflation number for August came in a wee bit hot. It was supposed to decline .01 percent, instead it increased .01 percent. The reaction on Wall Street was swift and vicious. Dow immediately reversed by 500 points within seconds of the release at 7:30 am Eastern time. The selling continued through the day with the Dow down around 1300 points. The market immediately realized that the Fed is going to go through with its plan to raise rates by ¾ of a point at the next meeting and follow it up with two more half point increases by the years end.

This will create a vicious cycle of increases for the nation’s renters. It will do the opposite of what the Fed wants to happen when they raise rates. They believe that by raising rates, it will decrease demand and inflation will come down. This is what should happen in an esoteric world but it is not what is about to happen. They are unleashing the worst case scenario for a lot of good hard working people that happen to rent their homes.

Interest rates have increased from 2.90% last year to currently 6.30% as of September 13 according to Mortgagenewsdaily.net. This increase has priced out a huge swath of buyers that need to finance a home purchased through the mortgage market. What has occurred is that instead of buying a home, they are now forced to rent. With the increase in mortgage rates, it is forcing people to rent and rent and rent. The result is this, people that need to borrow cannot afford the payment. The ones that don’t need to borrow and are swimming in cash are hedge funds and private equity. They are overjoyed at the prospect of increasing rents and falling house prices. They are currently keeping the housing market from falling too much because the percentage of sales with all cash offers is rising rapidly.

So this is the vicious cycle. The increasing rents are fueling the inflation numbers which causes the Fed to raise rates even higher. People increasingly cannot purchase a home and seek out rentals which are consuming an even higher percentage of people’s paychecks. Currently, in my area, a house goes up for sale. The average days on market is currently seventeen days. It sells fairly quickly and two weeks later, the for sale sign is gone and the for lease sign is up. We all know who bought the house with cash — Private equity.

More and more of our future is being stolen right out from underneath us. This is sad and will end badly for a lot of people. People cannot afford to buy and house and are really struggling to find a place to rent. The Fed is bound and determined to make this situation worse, all in the name of fighting inflation for the little guy. The Fed is getting this wrong and now we all must pay for the sins of the Fed.

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[1] Url: https://www.dailykos.com/stories/2022/9/13/2122698/-The-Rent-Is-Too-Dang-High-Fed-Cruises-U-S-Towards-Housing-Catastrophe

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