Jerome Powell: The Fed alone can't fix the broken housing market—the market and government will need to do so

“The housing market, it’s hard to game that out. The housing market is, in part, frozen because of lock-in, lower rates, people don’t want to sell their home because they have a very low mortgage and it would be quite expensive to refinance. As rates come down, people will start to move more and that is probably beginning to happen already. But remember, when that happens you’ve got a seller but you also got a new buyer in many cases. So it is not obvious how much additional demand that would make. The real issue with housing is that we have had, and are on track to continue to have, not enough housing. And so it’s going to be challenging, it’s hard to zone lots in places people want to live. All of the aspects of housing are far more difficult, and where are we going to get the supply? And this is not something the Fed can really fix. But as we normalize rates, I think you’ll see the housing market normalize. Ultimately by getting inflation broadly down and rates normalized and getting the housing cycle normalized, that is the best thing we can do for householders. And the supply question will have to be dealt with by the market, and also by the government.”

“Coming out of the pandemic, [mortgage] rates were very low, people wanted to buy houses, they wanted to get out of the cities and buy houses in the suburbs because of COVID. So you really had a housing bubble, you had housing prices going up [at] very unsustainable levels and overheating and that kind of thing. So, now the housing market will go through the other side of that and hopefully come out in a better place between supply and demand... None of this [the slow down] affects the longer run issue, which is that we got a built-up country and it's hard to get zoning and hard to get housing built in sufficient quantities to meet the public's demand… There's a longer run housing shortage”

“The housing market is in a very challenging situation right now. You have this longer run housing shortage, but at the same time, you have a bunch of things that have to do with the pandemic and inflation and our [The Fed’s] response with higher rates. You have a shortage of homes available for sale because many people are living in homes with a very low mortgage rate and can’t afford to refinance, so they’re not moving, which means the supply of regular existing homes that are for sale is historically low and a very low transaction rate. That [all] actually pushes up the prices of other existing homes and also of new homes because there’s just not enough supply. The builders are pushing, but they’re running into all kinds of supply issues still around zoning and workers and things like that… I will say the first problem is a longer run problem. The other problems associated with low rate mortgage [lock-in] and high [interest] rates and all that, those will abate as the economy normalizes and as rates normalize. But we’ll still be left with a housing market nationally, where there is a housing shortage.”