On the economic calendar is the Fed Interest Rate Decision! It is expected they will hike their benchmark Fed Funds Rate however it is CRITICAL to know the Fed does not directly control mortgage rates.
Let’s get technical with you for a hot second. Recently, the yield spread between the 10-year Treasury and 2-year Treasury has been trending lower. This increase in yield over time is known as the yield curve, which naturally moves up with maturity. But there is a phenomenon called an inverted yield curve, which has longer-term maturities yielding less than shorter-term maturities. This occurs when investors feel that prices in the future will decrease beneath present levels. When this goes inverted, it has been a very reliable recession indicator – YIKES!
Again, the Fed is expected to hike their benchmark Fed Funds Rate at their meeting on Wednesday March 16, 2022. This hike will push the short end of the yield curve higher, while the long end could move lower if it’s perceived that inflation is being reduced. This will cause an inversion at an even faster rate.
How will Raleigh real estate be impacted by a recession
If we are to see a recession, how will it impact housing? It is important to know recession does not mean housing bubble. Let me say it again, recession does not mean housing bubble. If look back at recessions since 1960, housing either remained essentially stable or increased in almost all of them.
Fresh on the minds of many is the recession in 2009. Please remember this fact, the recession was caused by the housing bubble, the recession did not cause the housing bubble. With the most recent recession in 2020, home prices rose.
Historically, home values perform very well during periods of inflation like we are experiencing today and during recessions too.
Is Raleigh real estate afforable?
Shifting gears, homes are still affordable today! In the most recent episode of the Martini Mortgage Podcast, episode 134 called “Home Affordability Today”, that dropped this week unpacks home affordability today. Spoiler alert, homes are less affordable today than they were 12-months ago however less affordable does not mean unaffordable. Real estate today remains what some call a ground floor opportunity level.
Buying a home this spring is smart and starting or continuing your homeownership journey can pay off significantly especially you take action sooner than later.
Raleigh Mortgage Broker & Certified Mortgage Advisor, Kevin Martini
Connect with a Mortgage Strategist with the Martini Mortgage Group by calling (919) 238-4934 if you want to learn more about what you have read or if you want to talk about the options available to you any your family.
