Article By: Jim Porter – January 5, 2023
World renowned author, economist and Wharton professor Jeremy Siegel criticized Federal Reserve Chairman Jerome Powell a couple of weeks ago for raising rates too high and too fast. Siegel suggested that looking at the inflation numbers year over year is a mistake because what you get is 11 months of old data and only one month of new data.
From what I see on the street, Siegel’s comments are right on.
The Fed is crushing the housing market and over the past six months, home prices have fallen by 5 or 10% and rents are coming down here in Solano County and all over the nation. There is no inflation in housing. Mission accomplished, so now enough already! The Fed has gone too far and too fast and never in history have mortgage rates increased this much in only one year.
The other thing I am seeing out here on the street is credit card companies charging rates approaching 30% again and unfortunately, credit card usage is way up for people who have had to use cards for living expenses like gas and food. Many of these folks cannot pay off their credit card balances monthly.
Consumer confidence and sentiment is at a 50-year low and the Fed’s goal of slowing down the economy and increasing unemployment has certainly been achieved in the real estate and technology industry.
In 2022, tech companies laid off over 125,000 highly paid employees and the real estate industry, which includes home builders, residential and commercial real estate companies, the mortgage business, title companies, appraisal management companies, home improvement businesses, and even furniture and home appliance companies must have cut well over 1 million people in 2022 if you count in the commission-only loan officers and real estate agents who made almost no income the past six months and have left the business.
Let’s hope the Fed not only pauses the rate hikes but considers loosening for the sake of the American people who are most affected by this Fed-induced recession, the shrinking middle class.
Jerome Powell and Janet Yellen, the Treasury secretary, need to help us and while they are at it, they may want to wake up our HUD secretary, Martha Fudge, and have her do something to help Americans with housing affordability and inflation by lowering the high-rate mortgage insurance FHA is charging the people who would like to become middle class homeowners.
I know it sounds bad and our 401(k)s look bleak, but these are the times when opportunities arise. “The time to buy is when there is blood in the streets.” – Baron Rothschild. “Be fearful when others are greedy and greedy when others are fearful.” – Warren Buffett.
Jim Porter, NMLS No. 276412, is the branch manager of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.
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