Signs of new crisis in the US housing sector: Federal Reserve -

Washington: The Federal Reserve warned that an increase in the average price for houses and the increasing interest rates on home loans could be the signs of a looming crisis in the housing sector. A similar situation was created in the decade after 2000 and the home prices crashed in 2006. The Global and the US economy suffered the major blow of recession following this crisis in 2008-09. Therefore, this warning issued by the Federal Reserve became significant. Only last month, Jerome Powell, the chief of the Federal Reserve, had warned that the US economy might receive big jolts given the increasing interest rates.

Currently, inflation is flaring up in the United States and the economy has already started feeling the heat. The inflation index has reached 7.9% in the United States and this is the most significant rise in the last four decades. Obstacles in the global supply chain, increase in raw materials like fuel and steel and shortage of workforce are considered the reasons for the rising inflation. The Russia-Ukraine war has only added to the problem and the indications are that inflation will only increase. Against this background, the upheavals in the housing sector could deliver major jolts to the US economy.

Saying ‘The home prices in the United States have increased over the last two years. The belief that this trend will continue is becoming stronger in the market. Many people will prioritise home purchase, fearing being left out. It will cause a further increase in expected home prices. As of today, the housing industry has reached a decisive juncture.’ the Federal Reserve warned about the looming crisis.

The leading website Realtor.com pointed out that home prices in the United States have increased by 27% in the last two years. But the website has also warned that this double-digit growth is not sustainable. The average home price in the United States has reached $405,000 and analysts have claimed that this is a record.