Fed Chair Powell: The U.S. housing market is 'putting in a bottom'
Fed Chair Jerome Powell took the podium on Wednesday to announce that the central bank would hold interest rates flat in June. Powell didn’t rule out future hikes, and called this move a “skip.”
Towards the end of the press event, Powell was asked to give an update on the nation’s most interest-rate-sensitive sector: the U.S. housing market.
“Housing is certainly very interest [rate] sensitive. It’s one of the first places that is either helped by low rates or held back by higher rates, and we certainly saw that over the course of the last year. We now see housing putting in a bottom, and maybe moving up a bit. We’re watching that situation carefully. I do think we’ll see rents and house prices filtering into housing services inflation [overall housing costs as tracked by CPI], and I don’t see them coming up quickly. I see them wandering around at a low level.”
Powell didn’t specify if he thought U.S. housing market activity had bottomed, or if he meant U.S. home prices had bottomed. That said, both have seen a little improvement this spring following last year’s home price correction, which was particularly sharp in overheated Western housing markets, and last year’s sharp pullback in home sales.
Indeed, after falling for seven straight months between June 2022 and January 2023, U.S. home prices as measured by the seasonally adjusted Case-Shiller National Home Price Index rose in both February and March. Meanwhile, both existing home sales and new home sales have improved since bottoming earlier this year.
Powell’s housing “bottom” comment on Wednesday is a stark contrast from last year when the Fed Chair repeatedly made bearish housing comments.
First, in June 2022, Powell told reporters that spiked mortgage rates would help to “reset” the U.S. housing market, and that “we need to get back to a place where [housing] supply and [housing] demand are back together and where inflation is down low again, and mortgage rates are low again.”
Then in September 2022, Powell told reporters that we had officially entered into a “difficult [housing] correction” that would restore “balance” to the housing market.
At the end of November 2022, Powell went a step further, and said a “housing bubble” had formed during the Pandemic Housing Boom.
“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,” Powell said in November at a Brookings Institute event. “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.”
Want to stay updated on the U.S. housing market? Follow me on Twitter at @NewsLambert.