Following Federal Reserve monetary decisions are a challenge in any industry. For commercial real estate, where financing is foundational to doing business, the shifts and uncertainty about where rates will go in the future go beyond ordinary frustration. The Mortgage Bankers Association (MBA), National Association of Realtors (NAR), and National Association of Home Builders (NAHB) this week sent a joint letter to Fed Chair Jerome Powell and the organization's board of governors conveying their "profound concern … that ongoing market uncertainty about the Fed's rate path is contributing to recent interest rate hikes and volatility." The groups had not previously addressed the Fed on this topic since the rate hikes started in mid-2022. Rising interest rates have been a problem for many in CRE and not just those in residential segments. Rapid onset of large jumps in the federal funds rate to combat inflation have driven financing costs lurching upward. Not that interest rates are out of step with longer history, but since the mid-2000s and Global Financial Crisis, the Fed had restricted interest rates in a bid to maintain liquidity in credit markets and increase economic activity when inflation was largely below the organization's 2% target. The MBA said that mortgage rates are at a 23-year high and spreads between 30-year mortgage rates and 10-year Treasury yields at "historically high levels" have been "dragging application activity down to a low last seen in 1996." "The difference between the current spread and the long-run average indicates mortgage rates for homebuyers across the country that are at least 120 basis points higher than they otherwise would be," the letter stated. "In other words, the uncertainty-induced mortgage-to-Treasury spread is costing today's homebuyers an extra $245 in monthly payment on a standard $300,000 mortgage." Of course, looking only at mortgage rates covers only part of the problem. Average sales prices of houses have receded somewhat from the 2022 Q4 high of $552,600, according to Census and HUD data. However, in 2023 Q2 that still left the figure at $495,100. In the first quarter of 2020, before the pandemic fully settled in, the average sales price was $383,000, leaving current prices having gained a net of 29.3% in under four years. The prices make everything, from down payments to monthly mortgage expenses and taxes, far more expensive and having grown at a pace never seen before since at least 1963. As the letter also noted, the increase in shelter costs have been "a leading source of inflation," as shelter makes up approximately a third of the Consumer Price Index. But the increase in rents also trace their way back to dovish Fed policies, including the zero-interest rate policy early in the pandemic, that pumped significant amounts of capital into hands of investors who then bid up property prices and pushed down cap rates that effectively required large forward rent increases to justify business plans. The groups urged the Fed to say that it did not contemplate further rate hikes and that it would not sell off any of its MBS holdings "until and unless the housing finance market has stabilized, and mortgage-to-Treasury spreads have normalized." Neither request is likely to be explicitly granted by the Fed, which is looking to data to indicate when it would guarantee a plateau, let along reduction, in rates and also sees its balance sheet actions as an intrinsic part of monetary policy.