March 17, 2023
Priced out: What will Fed rate hike do to Phoenix housing market?
In This News Story: Luis Cordova

ABC15 – Priced out: What will Fed rate hike do to Phoenix housing market?

When the Federal Reserve increases rates, what they are actually doing is changing the benchmark rate that banks use to lend money to each other on a nightly basis. Rate increases are inevitably passed on to consumers directly through loans that use variable rates like credit cards and student loans.

Even with today’s rate increase, they remain historically low. Since the 1950s, the Federal Reserve effective rate went as high as 19% in the early part of the 1980s. Since then, however, the rate has been on a long march to under 1%. The country has only experienced 13 months of federal reserve rates over 5% since 2001.

So how might a rate hike impact the Phoenix housing market?

Luis Cordova, an economist with Rounds Consulting, said that a change in rates will likely have a minimal impact since other market conditions are out of balance. “It should slow down demand a bit. But to be honest, we have such an imbalance with low inventory that it is not going to do much.” Cordova said.

The Phoenix housing market has an inventory problem. According to publicly available data from Redfin, housing inventory statewide, and by extension, Phoenix, is at the lowest available number of houses in ten years.


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