Fed Chair Jerome Powell says the housing market is bottoming and 'maybe moving up a little bit'
- Housing activity is bottoming and may already be improving, Fed Chair Jerome Powell said Wednesday.
- He acknowledged that higher mortgage rates have weakened the housing sector.
The housing market is bottoming and may already be improving, Federal Reserve Chairman Jerome Powell said on Wednesday.
He made the comment after the central bank kept benchmark rates steady but indicated more hikes may be needed later this year.
"Activity in the housing sector remains weak, largely reflecting higher mortgage rates," Powell told reporters after the rate announcement. "Certainly, housing is very interest rate-sensitive, and it's the first place, really, or one of the first places, that's either helped by lower rates or is 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 little bit. We're watching that situation carefully."
Mortgage rates, which are influenced by Fed policy, have soared over the past year as Powell has embarked on an aggressive tightening campaign.
According to Freddie Mac, last week's 30-year fixed mortgage rate averaged at 6.79%, a high for 2023 though it topped 7% last year.
A result of the steep jump in rates has been a largely frozen market, with fewer sales and less inventory as current homeowners are more inclined to stay put now.
And while that has also contributed to a cooldown in home prices, which spiked during the height of the pandemic as Americans rushed to move, affordability remains a high barrier for many.
In fact, 75% of homes are too expensive for middle-income homebuyers, the National Association of Realtors found. Lower demand has been pressuring prices down, though this has been balanced against a tight market inventory.
The Fed's decision on Wednesday to hold interest rates at the 5%-5.25% will allow policymakers to assess further macroeconomic data, such as any possible credit tightening, Powell said.
But, according to "dot plot" projections, two more hikes may still be on the table this year. That's as the central bank continues in its aim to bring inflation down to 2%. In May, consumer prices were up 4%.