Fed Hikes Interest Rates again, another 0.75%!

The RE market needed some killing. Granted, there is a structural issue here with years of under building (never fully got back on track after the Great Recession). Problem is in addition to taking the froth out of the post pandemic craziness (the intended effect of the rate hikes), it very well could chill new construction - which longer term just exacerbates the same problem.

But I don’t really see an alternative. Just depends on how far the fed go. I don’t think they’ve “crushed” RE yet, seems it will take several more hikes to see price declines, takes awhile for people to get real and adjust their listings, for homebuilders to realize their buyers can’t get financed, etc. With homebuilders especially, right now their lead time is up to a year (due to issues getting things like garage doors). They are just barely getting started with the order cancellations they will see.

 

Not great for my company which operates largely in the home construction industry. Our CEO is still forecasting the second best year ever for our company next year but I don’t see it. Our sales have fallen off a cliff since June.

 

Funny you mention Garage door. When I did my rebuild in 2021 the garage doors took the longest. Almost a year granted they were oversized and aluminum. Ordered in May of 21 and installed in April of 22.
Lucky the city let my builder put in a temporary to get a temporary CO.

 

Perhaps the gross sales will be high due to the price increases?

 

That’s all that’s saved us making budget this year and could really help next year. Cost of goods sold increase outpaced revenue increase meaning declining margin but the higher dollars means we’ll make budget this year. Our main material component has decreased drastically but our prices haven’t adjusted yet to reflect that so we should see increased margin next year.

 

The real estate market won't get crushed until we get caught up with building more houses, but we won't get caught up with building more houses while interest rates are high.

 

Agreed. Luckily I don't think it's the real estate market they're going after, it's the labor market.

 

Again, I really have to shake my head in disgust that they are making such heavy-handed moves to kill the labor market after stepping on the gas for another year once we got below 6% unemployment in April 2021. The message was clear back then: “yes unemployment is falling, it’s below 6%, but it’s not good enough. We need to keep rates at 0 and keep printing money.” Now we need to slam on the brakes so we can get back to 6% unemployment. I’ve got whiplash. All of this after calling the inflation “transitory”. These guys suck!

 

Or you could have paid off your mortgage and invested in the stock market and…oh wait, never mind

 

Yes, it’s a bit of a catch-22. Homebuilders had a bit of a building boom, but due to supply constraints the units able to delivered still never really caught up to what the boom in demand was calling for, and long term building trends were already insufficient. Interest rate hike probably helps keep some of the insane froth out, but doesn’t really create a healthy RE market if looking at metrics like affordability and household formation/first time homebuyers. Hopefully it at least chills some of the investor activity and tilts purchases towards end users, lack of access to “free money” tends to do that.

 

I think that’s the case with many companies that are still “making their numbers”.

Interesting to see if the pricing holds next year to balance out any decreased demand due to Fed tightening.

 

For all you small and large business owners...

 

I agree, but with an adder; Foolish fiscal policy, with added exogenous factors, and foolish belief in the early stages that it was transitory.

If it was just fiscal policy or exogenous factors maybe one could consider the possibility of transitory inflation. But together and collectively; no way.

 

I believe that he meant that they tempered their response to the inflation for fear of aggravating the UE. Soon we will most likely have both. Hopefully that IS transitory and quickly runs it’s course.

 

The fed has no choice to tame inflation but I think we have about reached the point this will cause a pretty bad recession sometime in 2023 not just a mild one.

 

7% is crazy-town, Biden/Dems spending like drunken sailors crap.

 

The housing market in Tampa has come to a screech halt.

 

So did I, went from 3.25% to 2.25% on a 15-year fixed rate.

 

That’s one benefit of the pandemic…