We Just Witnessed Something That Hasn’t Happened Since 2008, And It Is Causing The Housing Market To Crash – Investment Watch

by Michael

This wasn’t supposed to happen. The reckless behavior of the Federal Reserve and our politicians in Washington created a horrible inflationary spiral, and now the Fed is feverishly raising interest rates in a desperate attempt to get inflation back under control. But everyone knows that rapidly rising rates will absolutely crush the housing market. When the Federal Reserve raises interest rates, that puts upward pressure on mortgage rates. And as mortgage rates rise, more and more potential homebuyers will be forced out. With fewer potential home buyers on the market, this will put downward pressure on home prices. This is basic stuff you’d learn in an ECON 101 class, but Fed officials can’t seem to understand that what they’re doing will be extremely destructive to the overall US economy.

Remember the pain we went through in 2008?

This entire crisis was precipitated by a housing market collapse, and now a similar scenario is beginning to unfold before our eyes.

In fact, something just happened that we haven’t seen in all the years since 2008…

The average interest rate on a 30-year fixed-rate mortgage topped 6 percent for the first time since the financial crisisaccording to federal data released Thursday.

The average mortgage rate on the benchmark home loan rose to 6.02 percent as of Thursday, according to Freddie Mac, up 0.13 percentage points from last week and 3.16 percentage points above level of a year ago. It is the first time the 30-year fixed-rate mortgage rate has exceeded 6 percent since the week of November 20, 2008..

When mortgage rates are very high, the rich can still afford to buy homes because many of them don’t even need mortgages.

But for the rest of us, much higher mortgage rates make all the difference…

It has already marked a sea change in the housing market by adding hundreds of dollars or more to the monthly cost of a potential buyer’s mortgage payment, slowing what was not long ago a red-hot market. Higher rates force some potential buyers to continue renting. Since the beginning of the year, the average mortgage payment is up 38.5% to $2,306 from about $1,700 earlier this year.

Demand for mortgages is drying up very quickly.

Last week, the number of mortgage applications was 29 percent lower than during the same week a year ago.

And the number of applications to refinance mortgages seems to have fallen off a cliff…

As mortgage rates rise and home prices remain high, home sales slow.

With rates nearly double what they were a year ago, home loan applications are down and lower-down refinance applications have fallen off a cliff. 83% less than a year agoaccording to the Mortgage Bankers Association.

If you work in the mortgage industry, I feel really bad for you right now.

Of course, everyone involved in real estate will feel a great deal of pain in the coming months. According to Redfin’s chief economist, this is the “strongest” decline we’ve seen since the 2008 crash…

“This is the sharpest turnaround in the housing market since the housing market crash of 2008,” said Daryl Fairweather, chief economist at Redfin.

Billionaire Barry Sternlicht is even more pessimistic.

He just told CNBC that he thinks the Fed’s policies will cause a “big crash” in the housing market, and also warns that we could soon be in a “severe recession”…

“The economy is slowing down hard,” the chairman and CEO of Starwood Capital Group said on CNBC’s “Squawk Box” on Thursday.

“If the Fed keeps going like this, they’re going to have a serious recession and people are going to lose their jobs.” added.

Unfortunately, it is well on its way.

Even if the Federal Reserve stopped raising rates right here, we’d still have a real nightmare on our hands.

But the Fed won’t stop.

Fed officials have repeatedly told us that they will keep raising rates until inflation is under control, and that could take quite some time.

In fact, we’re being warned that next week could see “the Fed’s biggest rate hike in 40 years,” and that would really shake up the financial markets.

So what can we do to protect ourselves?

If you are selling a house, I would recommend that you try to sell it as quickly as you can while housing prices are still ridiculously high.

If you are looking to buy a home, I recommend waiting until housing prices drop significantly.

And one thing we can all do is prepare for the “severe recession” that billionaire Barry Sternlicht says could be coming.

During the recession of 2008 and 2009, millions of Americans lost their jobs. Without any income, many of these people suddenly couldn’t pay their bills, and many middle-class Americans ended up losing their homes as well.

You don’t want to suffer the same fate.

So I’ve been encouraging my readers to build a sizable emergency fund for a long time now.

A large emergency fund will allow you to continue paying your bills no matter what.

And it will also prevent you from losing your home.

Also, I would encourage everyone not to take on additional debt at this time.

When hard times hit, you’ll want your finances to be as “lean and mean” as possible.

Now is not the time to party.

Now is the time to batten down the hatches financially.

A very hard time is coming and everyone sees it coming.

The wise will prepare in advance, but the foolish will do nothing because they assume our leaders have everything under control.

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