Why High Housing Costs Might Force the Fed to Keep Raising Rates
UpdatedDec 6, 2025
- The Federal Reserve has already raised interest rates three times to slow inflation, and it appears to be working.
- The Fed may change its policy soon, and many would like it to change direction.
- However, home prices and rents remain high, and that could force the Fed to raise rates again.
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September should be an interesting month for the Federal Reserve and American households. Inflation continues to be an ongoing problem for US consumers, even though prices are starting to cool off. Some believe there is good reason for the Federal Reserve (the Fed) to call off another interest rate hike at its next meeting.
Why Does the Fed Raise Interest Rates?
Inflation happens when too many people are chasing too few goods. Today, it’s the result of supply chain problems keeping goods off the shelves, eager-to-spend consumers emerging from the pandemic, and high gas prices as the war in Ukraine throttles oil supplies.
When inflation takes hold, the Fed tries to cool things off by raising interest rates, which slows spending and takes the pressure off of prices. To that end, they have increased short-term interest rates three times so far in 2022.
Should the Fed Change Course?
Currently, retail inventories are rising and the cost of gasoline is starting to back off. It would seem that higher rates are doing their job.
Raising interest rates is tricky for the Federal Reserve. On the one hand, there are warning signs that the US may already be in a recession. Hiking interest rates could prompt big spikes in unemployment. It can also make things harder for American households carrying variable-rate debt like credit card balances.
Why the Fed Might Take Interest Rates Higher
However, the high cost of housing in the US might be a good reason for Federal Reserve chairman Jerome Powell to push through another rate hike next month. This would peg the Federal Funds rate at 3% to 3.25%, up from 2.25% to 2.50%.
Inflation is still high in the US, with costs about 8.5 % over prices from last year (excluding fuel and food price increases). But the toughest problem is housing costs in many parts of the country.
In June 2022, the average price of a single-family home was up more than 18% from the previous year to over $426,000. The dilemma of rising prices in the housing market is just one aspect of inflation that the Fed would like to get under control.
The Fed’s Balancing Act
Balancing productivity with inflation concerns will be on top of Powell’s agenda come September. Some believe that a .75% rate hike in September would be a good thing to blow out all the inflationary excesses that continue to dog the economy. But strong medicine is not always pleasant and past Fed decisions have usually favored standing pat on interest rates or cutting them—especially in the face of a weak economy—to jump-start productivity.
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Debt relief by the numbers
We looked at a sample of data from Freedom Debt Relief of people seeking credit card debt relief during November 2025. This data reveals the diversity of individuals seeking help and provides insights into some of their key characteristics.
Credit card balances by age group for those seeking debt relief
How do credit card balances vary across different age groups? In November 2025, people seeking debt relief showed the following trends in their open credit card tradelines and average credit card balances:
Ages 18-25: Average balance of $9,117 with a monthly payment of $285
Ages 26-35: Average balance of $12,438 with a monthly payment of $372
Ages 36-50: Average balance of $15,436 with a monthly payment of $431
Ages 51-65: Average balance of $16,159 with a monthly payment of $500
Ages 65+: Average balance of $16,546 with a monthly payment of $478
These figures show that credit card debt can affect anyone, regardless of age. Managing credit card debt can be challenging, whether you're just starting out or nearing retirement.
Collection accounts balances – average debt by selected states.
Collection debt is one example of consumers struggling to pay their bills. According to 2023, data from the Urban Institute, 26% of people had a debt in collection.
In November 2025, 30% of debt relief seekers had a collection balance. The average amount of open collection account debt was $3,203.
Here is a quick look at the top five states by average collection debt balance.
| State | % with collection balance | Avg. collection balance |
|---|---|---|
| District of Columbia | 23 | $4,899 |
| Montana | 24 | $4,481 |
| Kansas | 32 | $4,468 |
| Nevada | 32 | $4,328 |
| Idaho | 27 | $4,305 |
The statistics are based on all debt relief seekers with a collection account balance over $0.
If you’re facing similar challenges, remember you’re not alone. Seeking help is a good first step to managing your debt.
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Written by
Charles Morgan Evans
Charles Morgan Evans is the founding curator of the Hiller Aviation Museum in San Carlos, CA, and the author of two books, The War of the Aeronauts and Helicopter Heroine. He is an accomplished investor and an authority on frugal living.
Personal Finance
Personal Finance
