High interest rates have a number of negative effects on millions of low- and moderate-income families and housing providers. In many cases, high interest rates depress stock prices, home prices, and other asset values, affecting all income levels. But this time is different.
Rising interest rates make renters' incomes more unstable, discouraging housing construction and pushing down apartment rents.
Stock prices fell but then recovered to near record levels once the Fed began raising interest rates.
Homeowners in many parts of the country continue to see equity appreciation, and those with long-term fixed mortgages at the lowest interest rates (pre-2020) are not impacted by the Fed's policy.
Top Half: The Wealthy The wealth of the top half of U.S. income earners fell after the Fed's first interest rate hike in 2022, but is again at record levels.
Bottom half: In the bottom half of the squeeze, wealth is frozen below pre-rate hike levels
U.S. Consumer Price Index, Year-over-Year Change (January 2021 to May 2024)
Food and Energy Decrease 3.4% May 2024
All items 3.3% May 2024
56% of people making less than $25,000 a year have a credit card balance in 2022
38% of people who earn more than $100,000 a year carry a credit card balance (2022)
More and more residents are falling behind on credit card and car loan payments and are falling into increasing debt.
Monthly interest expenses have skyrocketed since the Federal Reserve began raising interest rates two years ago.
Inflation, falling savings and slowing wage growth are pushing up borrowing costs
As government spending continues, policymakers must keep interest rates high, even if the policies hurt already struggling renters.
High interest rates discourage the construction of apartments and homes, driving up rents over time.
Rising interest rates have slowed the housing market, with home sales falling sharply and prices remaining near record levels.
Change in household net worth (all assets, including stocks, bonds, cash, and property, minus liabilities, seasonally adjusted)
Nominal value 19%
Inflation-adjusted: 0.7%
Total credit card debt of American households hits record high of $1 trillion (March) – $1.2 trillion
Sources: High Interest Rates Are Hitting Poor Americans Hardest, Ben Casselman and Gina Smialek, New York Times; Figure 1—U.S. Census Bureau (May 15, 2024); Figure 2—Source: Federal Reserve Bank of St. Louis, seasonally adjusted; Figure 3—Federal Reserve Bank of New York; wsj.com; CNBC; Barron's
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