The Biggest Fed Rate Hike in 40 Years Could Be Coming Next Week and It Could Crash the Housing Market

Investors are getting spooked that the Federal Reserve’s aggressive interest rate hikes could damage the US economy (just look at Tuesday’s selloff).

One area of growing concern: housing. Interest rate hikes can lead to higher mortgage rates, which could cause people to think twice about buying a home.

So far, sales are slipping, while prices are holding steady. But some economists warn continued historic rate hikes by the Fed could risk crashing the housing market, underscoring the difficult task ahead for the central bank.

What’s happening: According to Tuesday’s Consumer Price Index report, housing costs rose 0.7% in August and are up 6.2% year-over-year, the largest increase since 1991.

That increase was largely responsible for August’s higher-than-expected pace of inflation. Combined with a tight labor market, those high prices give the Fed reason to continue to go hard at its policy meeting next week and beyond, Marvin Loh, senior strategist at State Street, told me.

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Source: CNN