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A Silver Lining: As Housing Price Appreciation Eases, Fed’s Fixes May Be Nearing End

In the Investor’s Soapbox article by A.G. Edwards The Silver Lining to a Housing Slowdown [Barrons] [1], the writer states:

History shows that housing is often the strongest part of the economy in the early stage of an expansion when interest rates are still low. As the economy improves, the Fed starts to worry about inflation, and policy makers push interest rates upward in order to contain inflation. As interest rates increase, housing usually cools off. If the Fed does not push interest rates too high, the slowdown in housing does not hurt the overall economy because spending in other sectors supports economic growth.

The takeaway in this article is that if the economy does not weaken significantly, housing prices are not expected to be hurt. If home prices are not appreciating rapidly, the Fed may be less likely to raise short terms rates any more because inflationary pressures are less apparent.

One can wish, can’t he?