As we know, the Fed has already started raising interest rates and we have already seen some of the downstream effects of that that you were talking about.
Mortgage rates are up and, you know, building has already started slowing down a little bit.
But I guess my question is, is it helping with inflation, which is the reason that the Fed is raising interest rates in the first place?
I think it is. And where it's had the biggest effect is in the housing market.
I've been very struck by this.
So, the Fed to date actually hasn't raised interest rates that much.
Only about a percentage point, but the mortgage interest rate has risen.
We were under 3% if you go back to December of 2021, and I haven't seen the latest numbers, but we have been around 5.3%, 5.4%, and there's -- a lot of people believe it's about to go considerably higher.
And that's had a huge impact on the housing market.
You know, at this point, a lot of this is anecdotal, but the one thing we can point to is that if you look at purchase mortgage applications, that's down about 15% year over year, so that means people looking to get a mortgage to purchase a house, that's down 15%.
That's a very big year-over-year falloff, and the anecdotal evidence that you hear from Realtors is if you go back, say, to the winter, every house that came on the market almost immediately had two, three, four above-listing offers.
Today, you're seeing price reductions. People can't sell at their listed price.
So it seems like that's really taken the air out of the market.
And that's a market where prices went up 30% over the last two years.
That's nationally. So in many places it's gone up 35, 40%.
That was important to stop. And I think they did that. And that's a really, really important thing.
You did not want to see house prices keep rising like that.
And I expect the reduction in home purchases to have an impact on rents, not this month or next month, but almost really by the end of the year.
So that's a place where it will have an impact on inflation.
Other places, I don't think it's had much impact on inflation, and that's because so much of the inflation is due to factors that really are beyond the Fed's control.
So, oil prices going up.
What's the Fed going to do to lower oil prices?
So that's again, one reason why I'm concerned that the Fed could go too far in raising rates, because so much of the inflation is due to factors that the Fed really has no control of, and it can't really in any big way do something about the inflation and gas prices.