According to Patrick Harker, president of the Federal Reserve Bank of Philadelphia, increased interest rates are making it harder for first-time home purchasers by increasing borrowing costs and reducing inventory, which is simultaneously driving up housing prices.
In prepared remarks for a meeting in Philadelphia organized by the Mortgage Bankers Association, Harker said Monday that higher rates deter current homeowners from putting their houses for sale, which reduces inventory.
According to Harker, the increase in interest rates “not only increased borrowing costs for those looking to buy a home, but it also contributed to the decline in inventory.” Due to “simple market dynamics,” there would be less inventory available, resulting in higher pricing overall and a smaller pool of possible purchasers.
Although new home sales are “trending upward,” he said, they cannot entirely make up for the general housing slump.
Harker, who will be voting on rate decisions this year, also reaffirmed remarks he made last week, saying that the Fed can maintain its benchmark rate as long as the economy does not experience a dramatic downturn. He reaffirmed that despite increasing the benchmark rate by more than 5 percentage points since last year and reducing its balance sheet, the US central bank is still exerting significant effort to combat inflation.
- Published By Team Nation Press News