Fed Chair Powell skeptical that lower rates will help housing market due to supply shortage

From Yahoo Finance: 2025-07-01 17:49:00

Federal Reserve Chair Jerome Powell testified before Congress that lowering interest rates may not lead to lower housing costs, citing a long-term supply shortage as the main driver of high prices. Lawmakers criticized Powell for high mortgage rates, questioning the central bank’s role in housing unaffordability. Mortgage rates remain elevated at around 6.8%, creating a “lock-in” effect for homeowners who are hesitant to sell and lose their low rates. Powell warned that even if the Fed lowers rates, high housing costs may persist due to various factors like labor shortages and material costs. High housing costs are also influenced by low inventory, with the median U.S. home price hitting a record $396,500 recently. The U.S. has faced a housing shortage of nearly 4 million homes since the 2008 crisis, exacerbating price increases. Powell remains skeptical that lower interest rates alone will address the housing supply issue and bring down prices in the long term.

Read more: Will Lower Rates Help the Housing Market? Fed Chair Powell’s Not So Sure.