Is it possible that rising house prices would increase the Fed's ability to strengthen it?

Is it possible that rising house prices would increase the Fed's ability to strengthen it? ...

Home prices are rising, with the median price for existing properties increasing by 15% in March, from a year ago to $375,000.

In 1999, the National Association of Realtors (NAR) began tracking data at its highest level.

According to Bloomberg, property prices remain rising and housing demand remains high.

They [Fed officials] will not see the decline in economic activity through housing they usually get, at least not as quickly as they typically get it, according to Mark Zandi, the chief economist for Moodys Analytics. They might have to push on the brakes even harder.

Sales Decline

As it stands, there are already signs that the housing market is improving. The increase in interest rates combined with rising mortgage rates helped drive existing property sales down 2.7 percent in March, compared to February, and 5.4 percent increased by a year ago.

According to Freddie Mac, the 30-year fixed-rate averaged 4.17% in March, up from 3.76% in February.

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That rate has continued to rise since then, averaging 5.1 percent in the week ended April 28. This is modestly down from the previous weeks 12-year high of 5.11%. The rate was 2.98% a year ago.

In a statement, Sam Khater, the chief economist of the Financial Times, said that the combination of swift home price growth and the fastest mortgage rate rise in over 40 years is affecting purchase demand.

Pending Home Sales Drop

The National Association of Realtors'' Pending Home Sales Index fell 1.2 percent in March, the fourth monthly drop in a row. Pending sales, measured for existing properties, fell 2.8 percent from a year earlier.

A sale is still pending after the contract has been signed, but the transaction hasn''t closed. The sale is usually ended within one or two months after signing. So pending sales are a good indicator for current sales.

"The decline in contract agreements is implying that several offers will soon dissipate and be replaced by much better and normalized market conditions," said Lawrence Yun, the NAR''s chief economist.

Moreover, those who own their homes have made out quite well over the past two years, owing to rising rates. According to the New York Times, people in the same category have gained $6 trillion in income, excluding rental properties.

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