Financial expert Kelly Brothers discusses impact of Federal Reserve raising interest rates

THE HOUSING MARKET IS COOLING, WITH HOME SALES DROPPING FOR SEVEN STRAIGHT MONTHS. >> KCRA 3 MONEY EXPERT KELLY BROTHERS JOINS US NOW TO MAKE SENSE OF THIS INTEREST RATE HIKE. KELLY, WHAT IMPACT COULD WE SEEN? >> WE HAVE ALREADY SEEN MULTIPLE IMPACTS BUT ANY VARIABLE INTEREST RATE PRODUCT WHETHER IT IS A CREDIT CARD, AND AUTO LOAN, EVEN HOME EQUITY LINES OF CREDIT OR MORTGAGES WHICH ARE LONGER-TERM LENDING FACILITIES, ALL IMPACTED BY THIS, ALL TEND TO MOVE A LITTLE HIGHER, ALL MAKING LIFE MUCH MORE EXPENSIVE THAN IT WAS ON YOUR AGO. THE POSITIVE SIDE, FOR SAVERS WHO GOT NOTHING, I MEAN ZERO FOR THE LAST TWO YEARS, FINALLY ARE GETTING SOME MONEY THROUGH CDS, SHORT-TERM BONDS, MONEY MARKET FUNDS. AT LEAST WE ARE GOING TO GET SOME MONEY THERE BUT WHATEVER YOU GET ON THE SAVINGS SITE IS ALWAYS GOING TO BE LOWER THAN THE ACTUAL INFLATION RATE WHICH IS CALLED THE REAL RETURN IS NEGATIVE. HE IS GOING TO BE AGGRESSIVE ABOUT IT. JEROME POWELL IS ABSOLUTELY RIGHT. MOST ECONOMIC EXPANSIONS HAVE TAKEN PLACE IN TIMES OF VERY LOW INFLATION. ONCE YOU GET BACK THERE AREA THE FED IS BETTING THEY ARE GOING TO SHOOT TOO HIGH AND START CUTTING RATES AGAIN PROBABLY IN 2024 AND 2025 TO GET BACK TO A NEUTRAL LEVEL WHICH IS PROBABLY RIGHT AROUND WHERE WE ARE NOW BUT NOT ENOUGH TO BRING IN THE INFLATION THEY CONSIDER TO BE DANGERUS. >> WHEN IT COMES TO THE HOUSING MARKET, WE ARE SEEING IT COOLING , A HOUSING RECESSION, HOW DOES INFLATION PLAY INTO THAT? >> IT IS A HUGE CHANGE FOR THAT MARKET AND A VERY SHORT AMOUNT OF TIME. EXISTING HOME SALES AS LOW AS THEY HAVE BEEN NOW GOING BACK ABOUT SEVEN YEARS OR SO IF YOU TAKE OUT THE TWO OR THREE MONTHS RIGHT WHEN THE PANDEMIC BEGAN. PRICES ARE BEGINNING TO COME IN, USUALLY PRICES DROP 1%-2% OVER THE SUMMER, THE SUMMER THEY DROPPED 6%. THERE IS THE OTHER PIECE TO THIS ALSO WHICH IS ANYONE WHO REFINANCED IN 2021 AND MAYBE GOT EIGHT 2.5 PERCENT MORTGAGE, THEY WILL NOT WANT TO MOVE FOR A LONG TIME BECAUSE THEY WILL NOT WANT TO BUY ANOTHER HOUSE TO TAKE ON A MORTGAGE WHEN THEY HAVE A 2.5% MORTGAGE. THE HOUSING MARKET IS IN FOR A RECKONING AND THAT IS PROBABLY A GOOD THING BECAUSE IT WAS SO ABNORMALLY HOT FOR SO LONG.