Here's how one top Fed official is thinking about the increasingly unaffordable US housing market

• Tom Barkin, president of the Richmond Fed, recently commented on housing on the "Odd Lots" podcast.
• Home prices have stayed high as the pandemic sparked a "secular change" in the way people think about housing.

The housing market is a critical part of the US economy that needs rebalancing, and the pandemic caused a shift in the way Americans think about the sector, according to Richmond Fed President Tom Barkin.

In an interview with the "Odd Lots" podcast this week, he explained that even though the Fed's interest rates have brought some demand down for homes, inventory snags have prevented meaningful improvements in affordability.

Mortgage rates have surged to 22-year highs above 7%, and the S&P CoreLogic Case-Shiller Index for home prices hit a new record in July. Meanwhile, Zillow economists forecasted home prices still have room to run higher.

"If you have a 3% mortgage [rate], you're not dying to sell that house and get into a 7% mortgage, it just changes the financial formula," Barkin said. "And so what you see in terms of the effect is still a very limited supply of houses for sale."

He added that the housing market ultimately remains imbalanced, and that could mean sectors other than housing will need to see slowdowns.

"To get into balance, you can get there with lots of different goods and services pricing in very different ways," Barkin said. "You don't just have to get one element in shape. Now, housing's a big part of the economy, and so if rents come into line and housing comes into line, that would be useful. But relative prices move all the time, and if what we've seen is a secular shift toward more demand for housing, that might mean somewhat less lessening of housing prices and somewhat more lessening of other prices."