Fed sees risk of big declines in still-lofty US house prices

Fed sees risk of big declines in still-lofty US house prices THE Federal Reserve suggested on Friday (Nov 4) that lofty home prices could be susceptible to steep declines after big run-ups in recent years on the back of ultra-low interest rates. “With valuations at high levels, house prices could be particularly sensitive to shocks,” the Fed said in its semiannual Financial Stability Report released on Friday. Though housing price increases have slowed recently as the Fed has raised interest rates, valuations remain stretched when compared with such metrics as rents, the central bank said. The rate increases come after years of ultra-easy credit conditions that encouraged borrowers to take on added leverage and prompted investors to adopt riskier positions to boost returns.

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