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On The Money — Higher interest rates mean fewer affordable homes

The Federal Reserve’s push to cool off inflation may deepen the affordable housing crisis. We’ll also look at President Biden’s prayer for a good economy and the Democratic push to lower drug prices. 

But first, we’ve got bad news for fans for permanent daylight saving time.

Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Subscribe here.

Why the US housing shortage is likely to get worse

Rising interest rates and economic headwinds are making it harder for the U.S. to fill a severe shortage of affordable housing, and the problem is likely going to get worse.

  • The Federal Reserve has been working for months to stanch the sting of inflation by raising rates and slowing the housing market. Home sales and construction have fallen off a cliff this summer as a result.
  • Sales of new and existing homes have also fallen for months on end after the Fed drove up mortgage rates. But experts say that these rate hikes, coupled with supply shortages and a historically low inventory, will only exacerbate the shortage.  

“With mortgage rates up, it’s really just put a lot of buyers on the fence and into the rental market because they simply can’t afford mortgage payments,” Daryl Fairweather, chief economist at Redfin, said in an interview.

Higher interest rates are also likely to keep homebuilders from constructing enough homes to meet those needs. The pandemic itself froze home construction for months, then created a series of supply and labor shortages, delays, backlogs and obstacles to completing homes on budget and schedule.   

Sylvan has more here. 

RECESSION STRESS 

Biden: ‘God willing, I don’t think we’re going to see a recession’ 

President Biden says he doesn’t expect the U.S. economy to enter a recession ahead of a key report on gross domestic product that could show the economy contracting. 

“We’re not going to be in a recession in my view,” Biden told reporters on Monday after a virtual event focused on semiconductor legislation.  

“The employment rate is still one of the lowest we’ve had in history. It’s in the 3.6 [percent] area. We still find ourselves with people investing,” Biden continued. “My hope is we go from this rapid growth to steady growth, so we’ll see some coming down. But I don’t think we’re going to, God willing, I don’t think we’re going to see a recession.”

  • The White House is bracing for Thursday’s Bureau of Economic Analysis report, which could show second consecutive quarter where the economy contracted, an indicator often used by economists to mark a recession.
  • Numerous White House officials have spent the past week pushing back on the idea that the economy is in recession based purely on the data that will come out Thursday.

Alex Gangitano has more here. 

Grain prices jump after Russian missile attack

A Russian missile attack on the Ukrainian port of Odessa drove grain prices back up after they relaxed on news of a United Nations-brokered deal between Moscow and Kyiv struck late last week to move stalled agricultural goods out of the Black Sea.

  • Wheat future contracts jumped around 4 percent after Saturday’s attack, while soft red winter wheat jumped nearly 3 percent and corn futures rose 2 percent.
  • The center is expected to be up and running by Tuesday and ships loaded with Ukrainian grain “may move within a few days,” deputy U.N. spokesperson Farhan Haq said in a briefing Monday. 

“We want all sides, as the secretary-general made clear on Saturday, to fully implement what they’ve agreed to,” he said in reference to the U.N.-brokered initiative. 

Tobias Burns has the details here. 

DRUG PRICING PUSH 

Democrats rev up high-stakes final push to lower drug prices 

Senate Democrats are making a high-stakes final push to get legislation to lower prescription drug prices over the goal line.  

While much of President Biden’s original economic package, from climate measures to higher taxes on the rich, has been stripped out by Sen. Joe Manchin (D-W.Va.), the party is trying to salvage a major measure to lower the cost of prescription drugs that Manchin said he would back.

  • It appears that Democrats have the votes to pass the measure without any GOP support, but a range of obstacles, including COVID-19 absences and a parliamentarian ruling, loom in the final stretch.
  • The measure would allow Medicare to negotiate the price of popular drugs, prevent drugmakers from raising prices faster than the rate of inflation and cap out-of-pocket drug costs for seniors on Medicare at $2,000 per year starting in 2025.

Peter Sullivan has more here. 

Good to Know

The Securities and Exchange Commission (SEC) on Monday charged former Rep. Stephen Buyer (R-Ind.) with insider trading, including purchasing stocks based on nonpublic information. 

The SEC filed charges in Manhattan federal district court, accusing Buyer of making illegal stock purchases in at least two instances, according to an agency press release. The SEC is seeking to force Buyer to disgorge profits he made from the alleged schemes. 

Here’s what else we have our eye on: 

  • Sen. Elizabeth Warren (D-Mass.) wrote in a new op-ed that Federal Reserve Chairman Jerome Powell’s efforts to control inflation risk “triggering a devastating recession” and jeopardizing the country’s “surprisingly strong” post-pandemic economic recovery.
  • More than half of older women who live alone are classified as poor under federal poverty standards or have insufficient incomes to pay for essential expenses, while 45 percent of men share the same financial situations, according to the University of Massachusetts-Boston’s Elder Index. 

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow. 

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