Sam Zell, real estate investor, believes the Fed will raise rates by as much as 6%

  • Sam Zell, a legendary property investor, stated that the Fed will need to raise interest rates to 6% to reduce inflationary pressures. 
  • According to Fox Business, a “shocking event” was the fact that mortgage rates increased more than twice this year. 
  • Zell sees the US economy entering recession. 

There is little comfort in the recent ease in mortgage rates. The Federal Reserve will likely continue with its stringrate hikes to keep inflation under control, Sam Zell, a billionaire property investor and billionaire, stated Thursday. 

According to the chairman of Equity Group Investments, the founder and chairman of privately owned Equity Group Investments, “I think that probably about 5% is the minimum necessary for slowing the pace of inflation. It’s probably going to take something above that.” said in a Fox Business interviewThursday “Probably closer than 6 [percent]More than 5 

Next week, the Federal Reserve will increase borrowing costs by 50 basis points. This would bring the fed funds rate to between 4.25% and 4.5%. Investors are pricing in additional rate hikes in 2023, which will bring it up to 5%. 

As the benchmark rate rises, so do borrowing costs to buy homes. The average 30-year fixed mortgage rate was at a 21-year high of 7.16%According to the Mortgage Bankers Association, it was in October.

Although it has now fallen to 6.41%, it is still higher than the 3.4% it was at the beginning of the year, before the Fed began increasing borrowing costs from 0% in an effort to calm consumer price inflation, which reached 9.1% earlier this month.  

“In a very, very short period of time … less than 90 days, mortgage rates doubled. Zell said that while it is shocking that mortgage rates have doubled, the fact they have risen some is not surprising. “Everything comes down to your monthly payment … and the monthly payment has more than doubled in 60 days, and it’s adjusting accordingly. I wouldn’t take too much comfort in the fact that mortgage interest rates have fallen.” 

Zell predicts that the world’s largest economy will contract next year. 

“I think the chances of us going into a recession are very good. It remains to see if this recession will be very severe or not. It’s hard to believe that we are not moving into an area of higher interest rates and with many people sitting on the sides, refusing to make commitments,” said he.

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