Fed Faces Dilemma as Housing Market Slows but Prices Stay High
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Housing costs remain high, with shelter accounting for a large portion of consumer prices and inflation. The Fed is facing pressure to cool the housing market.
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Rent burdens are at record levels, with 20 million households spending over 30% of income on rent. Housing shortages are contributing to high costs.
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The Fed needs to study the housing market carefully, as activity is slowing but prices remain elevated. Housing is a key focus in taming inflation.
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Mortgage rates are near 23-year highs and fixed rates are around 7.86%. High bond yields connected to mortgage rates are an economic concern.
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Home ownership rose during the pandemic but remains unaffordable for many. The Fed is unsure if policy is yet restrictive enough to tame housing inflation.