In this Real Estate News Brief for the week ending July 30th, 2022... a negative GDP report, inflation heads higher, and the Fed’s latest rate hike. Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review. Economic NewsWe begin with economic news from this past week. The Federal Reserve carried out its fourth rate hike this year to slow inflation, and the second increase of .75%. That puts the top end of the overnight lending rate at 2.5%. Higher rates make it more expensive for businesses and consumers to borrow money and that helps slow the economy, and the rate of inflation. (1)The latest reading on inflation was a report on the PCE or Personal Consumer Expenditure Index. That shows a 1% increase in June to a yearly rate of 6.8%, which is the highest since January of 1982. When you eliminate fuel and food, the core PCE is 4.8%. The Federal Reserve considers the PCE to be more accurate than the CPI because it takes into account other variables, such as consumers shopping for different, lower-priced items. (2)Fed Chief Jerome Powell has said repeatedly that inflation is too high, but he said during a press conference after the latest rate hike, that the U.S. is not in a recession despite a second quarter of negative economic growth. The government says the economy shrank at an annual pace of -.9% in Q2. That’s after a -1.6% loss of economic activity in Q1. Two consecutive quarters of negative growth is the standard definition of a recession, but thanks to a number of things bolstering the economy, such as a strong job market, many economists, including Fed Chief Powell, don’t believe we’re there yet. (3) Powell said several times that the central bank will do whatever it takes to control inflation, which may put the U.S. into a recession at some point. He suggested more rate hikes in the coming months but didn’t give any forward guidance because the situation is so volatile. The Fed expects short-term interest rates to hit 3.5% by the end of the year. Some economists are predicting a 50 point hike in the next meeting followed by two 25 point hikes. (4)Initial jobless claims had been slowly rising, but were about 5,000 applications lower last week. The Labor Department says they fell to a total of 256,000. Ongoing claims were also lower. They were down 25,000 to 1.36 million. (5)On to the housing market…New home sales fell to their lowest level since the pandemic began. They were down 8.1% in June to a seasonally-adjusted rate of 590,000. The year-over-year drop is 17.4%. Many consumers can’t afford a high-priced home combined with a higher mortgage rate. The median sales price of a new home was $402,400 in May. (6)Pending home sales for existing homes also tumbled in June. According to the National Association of Realtors, they were down 8.6% for the month and 20% year-over-year. As MarketWatch reports, potential home buyers are spooked by high home prices and inflation in general, higher mortgage rates, and talk of a recession. NAR’s Chief Economist Lawrence Yun says that buying a home in June of this year was 80% more expensive than it was in 2019. (7)*But home price growth has started to slow down. The S&P CoreLogic Case-Shiller Index shows a year-over-year price growth of 19.7%. That’s down from 20.6% in April. (8) Keep in mind that the Case Schiller index is a lagging indicator, and a lot has changed in the market since May. As for consumer thoughts on the economy…The Conference Board reports that confidence levels fell for a third month in a row to a reading of 95.7. Economists like to say that consumer spending is still robust, but the International Monetary Fund says that’s at higher income levels. One member of the Conference Board, Lynn Franco, says that consumers will likely face “headwinds” over the next six months as they deal with inflation and additional rate hikes. (9) A survey on consumer sentiment by the University of Michigan shows sim