With the housing market slumping and the Fed indicating rate hikes will likely continue, taking mortgage rates with them, three major organizations teamed up in a letter to Fed Chairman Jerome Powell on Monday, imploring him to help the housing industry in several ways.
The two-page letter, with a ‘regarding’ title of Providing Market Certainty on Rate Path, MBS Sales, conveyed “profound concern shared among our collective memberships that ongoing market uncertainty about the Fed’s rate path is contributing to recent interest rate hikes and volatility. This has exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume. These market challenges occur amidst a historic shortage of attainable housing.”
After citing specific numbers and statistics on alarming mortgage rates and Treasury yields, which the group said were to a great degree causing the housing market slump, they came to two requested points.
“We strongly urge the Fed to make two clear statements to the market:
- The Fed does not contemplate further rate hikes;
- The Fed will not sell off any of its MBS holdings until and unless the housing finance market has stabilized and mortgage-to-Treasury spreads have normalized.
“The speed and magnitude of these rate increases, and resulting dislocation in our industry, is painful and unprecedented in the absence of larger economic turmoil,” the letter said. “These steps will provide the market greater certainty about the Fed’s rate path and its plans for the MBS portfolio and reduce volatility for traders and investors.
“Housing activity accounts for nearly 16% of GDP according to NAHB estimates. We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the letter concluded.
Click here to read the full letter.
