House prices have been rising gangbusters since the covid-19 pandemic pushed by Americans changing their living habits in light of the pandemic and ultra-low mortgage rates. Rampant inflation throughout the economy though has forced the Federal Reserve to take aggressive measures to rein in rising prices.
Policymakers, after easing into raising rates in March and April, kicked into high gear with four straight 75 basis point rate hikes, the fastest increase since the 1980s. The initial effect has been a spike in mortgage rates which is cooling the housing market but has also raised concerns that the US economy could be thrown into a recession.
Generally, declining home values often go hand-in-hand with economic recessions, but that isn’t always the case. As people lose their jobs, it becomes more difficult to repay a mortgage and if a borrower falls behind, they may face foreclosure.
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