Powell: 'Housing market faces some really significant challenges' that a 25 basis-point rate cut won't resolve

"So the housing market faces some really significant challenges, and I don't know that, you know, a 25 basis point decline in the federal funds rate is going to make much of a difference for people. You know, housing supply is low. Many people have very, very low, low, low rate mortgages from the pandemic period, and they kept refinancing and caught the really low. So it's expensive to them to move. And you know, we're a ways away from that changing."

"Also, we're just, we haven't built enough housing in the country for a long time, and so a lot of estimates suggest that we just need more housing of different kinds. So housing is going to be, you know, a problem, and you know, really the tools to address it are we can, we can raise and lower interest rates, but we don't really have the tools to address, you know, a secular housing shortage, a structural housing shortage."

After a 25-basis-point cut to the federal funds rate, the Fed indicated that rate reductions alone will not restore housing affordability. Housing supply remains low and many homeowners hold very low pandemic-era mortgage rates, which discourages moving and reduces market turnover. The country has not built enough housing for a long time, and estimates indicate a need for more housing of different kinds. Interest-rate policy can be adjusted, but central bankers lack direct tools to solve a secular, structural housing shortage. The Fed also conceded uncertainty about whether prolonged pandemic-era MBS purchases contributed to housing market overheating.

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