Fed Chair Jerome Powell Says a ‘Difficult Correction’ Should Balance US Housing Market – Economics Bitcoin News

Following the Covid-19 pandemic, real estate investors did extremely well, despite the millions of Americans that were put out of work and faced evictions during the lockdowns in 2020. Stimulus put a bandage on the financial wounds inflicted by Mainstreet business shutdowns and deadlocked supply chains. In fact, after the pandemic, America’s housing market boomed to new heights and soared amid rising inflation. Meanwhile, the U.S. Federal Reserve chair Jerome Powell hinted this week that the U.S. housing market needs a correction, and he believes it can be adjusted in a way so “people can afford houses again.”

‘Deceleration in Housing Prices’ Is a ‘Good Thing,’ Fed Chair Declares

Last Wednesday, the U.S. Federal Reserve met to announce the next interest rate hike and the central bank raised the federal funds rate by 75 basis points (bps). The Fed said last week that it aims to “achieve maximum employment,” and the central bank is still targeting a 2% inflation rate over the long term. The three-quarters of a percentage point rise is the Fed’s third 75bps rate hike in a row. Following the 75bps increase, stock markets, cryptocurrencies, and precious metals had seemingly priced in the Fed’s rate increase.

However, the Fed chair also discussed the U.S. housing market this week, and the commentary rattled markets during the past few days. Powell hinted at a real estate correction or a cooldown of housing prices to wrestle inflation down back to the 2% levels.

“The deceleration in housing prices that we’re seeing should help bring sort of prices more closely in line with rents and other housing market fundamentals — And that’s a good thing,” Powell insisted. “For the longer term what we need is supply and demand to get better aligned, so that housing prices go up at a reasonable level, at a reasonable pace, and that people can afford houses again,” Powell told the press on Wednesday.

The 16th chair of the Federal Reserve added:

From a sort of business cycle standpoint, this difficult correction should put the housing market back into better balance.

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