March 23, 2022

Will The Hawkish Fed Bring Down Housing?

Mortgage rates have risen faster this quarter than they have in decades and the Fed hawks are firmly in the driver’s seat. Will this cause a hard landing in housing? Comparisons with the 2008 Global Financial Crisis argue that it will not. Back then, housing was overbuilt and financially fragile households used subprime loans to buy homes. The chart shows that this time around the credit quality of the marginal buyer is much better. No doubt, irresponsible lending has begun to occur, but not enough to have a macro impact.