Commentary
After months of decline, May’s report on homebuilding showed a surge in activity. This news gives evidence of the emergence of the crosscurrents that inflation often brings to the residential real estate market.
On one side is the depressing effect of rising mortgage rates. Running counter is the attraction of real estate as an inflation hedge. The emergence of this second current should moderate the ill effects of high and rising mortgage rates on homebuilding and the economy generally. That is a welcome trend. At the same time, the use of real estate to hedge inflation shows that people expect general inflationary pressures to last, and those expectations will make the Federal Reserve’s (Fed) inflation fight more difficult….