Last year, the housing prices increased by more than eleven percent, representing the single largest one-year increase since the 2007 Financial Collapse.
In late March, the Federal Reserve of Dallas reported that unprecendented growth in the housing market relates to various factors including “shifts in disposable income, the cost of credit and access to it, supply disruptions, and rising labor and raw construction materials costs.” These factors contribute to what the Federal Reserve refers to as “sustained real house-price gains,” and are not signs of a market bubble.
However, the sudden increases could lead to a bubble because of a growing “belief that today’s robust price increases will continue [and in cases where] many buyers share this belief, purchases arising from a “fear of missing out” [and] can drive up prices and heighten expectations of strong house-price gains.”
To stabalize the market and ensure prices reflect “market fundementals,” the Federal Reserve has announced that they will begin to increase interest rates. Interest rates are used to regulate inflation in the economy. Currently, inflation is increasing and by raising rates, the Fed makes borrowing and…
