“The fear of interest rate hikes has affected people’s thinking — not just homeowners, but new buyers who wanted to get in before interest rates go any higher,” says Robert Shiller, an economics professor at Yale University.
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A decade-long rally in U.S. home prices could finally end once the Federal Reserve halts its rate-hiking cycle, said Robert Shiller, an economics professor at Yale University.
Home prices did steady profits since 2012according to the S&P Case-Shiller US National Home Price Index.
“The fear of interest rate hikes has affected people’s thinking — it’s not just homeowners, it’s new buyers who wanted to get in before interest rates go up any further,” Shiller said.
“They wanted to lock in. So it was a positive effect on the market. But it’s coming to an end,” he added.
Shiller noted that the index reflected “unusual behavior” over the past six months, saying prices “seemed to be OK and then started to go up.”
US home prices reached a record high in Mayrose 0.7% nationally at a seasonally adjusted pace since April, according to data from another benchmark, the Black Knight Home Price Index.
“I think … people don’t know what to make of what the Fed is going to do?” situation,” Shiller said.
The Fed indicated during its June meeting that further tightening is likely, but at a slower pace than the pace of growth that has characterized monetary policy since early 2022.
“We’ve already seen a dramatic rise in interest rates a few years ago. And I think there’s a sense that that’s enough,” the professor said, adding that a soft landing was possible, though unlikely to be “perfect”.
But Shiller added that he was “not panicking,” saying that some of the recent surge in home prices was “just seasonal,” noting that prices typically rise in the summer.
The Fed is due to meet on Wednesday. Economists polled by Reuters predict a 25 basis point increase in interest rates.