“Housing Is Going to Be a Problem”: Powell’s Warning After the Fed’s Final 2025 Rate Cut

The Fed just delivered its final policy move of 2025: a quarter-point rate cut approved in a divided 9–3 vote. During the FOMC Press Conference on December 10, Fed Chair Jerome Powell used the moment to send one of his bluntest messages yet on housing.

While headlines focused on the rate cut, Powell also addressed questions specific to the housing market, making it clear that monetary policy won’t be fixing the housing market anytime soon.

He warned that the problems agents and consumers feel every day (low supply, locked-in mortgage rates, affordability walls) are bigger than anything a 25-basis-point adjustment can solve.

During the press conference, Powell stated:

“Housing is going to be a problem… We can raise and lower interest rates, but we don’t really have the tools to address a structural housing shortage.”

Even after three rate cuts this year, Powell said the market is still sitting in the “broad range of neutral,” and the Fed is “well positioned to wait and see.” As far as what to expect next year, FOMC’s own projections show only two more cuts between now and the end of 2027.

Meanwhile, the split vote, the first with three dissents since 2019, exposes a Fed that’s divided on how to balance inflation that’s still above target, a labor market showing early stress, and a housing sector Powell openly described as “weak.”

Powell’s full comments paint a housing picture that matters for every buyer, seller, and agent heading into 2026. On today’s Hot Sheet, Byron Lazine broke down what Powell said and what it signals for the year ahead. Tune in, and read on below for direct quotes about housing from the press conference. 

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Housing Mentions During the FOMC Press Conference

Below are all of the direct questions and statements about the housing market during Powell’s FOMC press conference.

From Powell’s opening transcript (01:40):

“Consumer spending appears to have remained solid, and business fixed investment has continued to expand. In contrast, activity in the housing sector remains weak. The temporary shutdown of the federal government has likely weighed on economic activity in the current quarter, but these effects should be mostly offset by higher growth next quarter, reflecting the reopening.”

Question from Nick Timiraos, Wall Street Journal (21:00): 

“If I could follow up, the unemployment rate has been rising very gradually for the better part of two years. And indeed the statement today no longer describes the unemployment rate as remaining low. What gives you confidence it won’t continue rising in 2026, especially when housing and other rate-sensitive sectors still appear to be feeling restrictive policy… notwithstanding the 150 basis points and cuts prior to today?”

Powell’s Response (21:25):

“The idea is that with now having cut 75 basis points more now and having policy, I’d call it in a broad range of plausible estimates of neutral, that that will be a place which will enable the labor market to stabilize or to only tick up one or two more tents, but we won’t see any kind of a sharper downturn, which we haven’t seen any evidence of at all. 

“At the same time, policy is still in a place where it’s not accommodative, and we feel like we have made progress this year in non-tariff related inflation. And as tariffs come through, as they flow through, that’ll show through next year. But as I said, we’re well placed to wait and see how that turns out. That is our expectation, but we’re going to start to see the data and it’ll tell us whether we were right or not.”

Question from Christine Romans, NBC News (41:38) : 

“I wanted to ask you about how the higher-income households are really driving spending right now. They’re backed by home equity and stock market wealth, but lower-income consumers are really struggling with the accumulation of five years now of rising prices. It’s price levels, not really the inflation rate, holding some of these families back. How sustainable is this so-called K-shaped economy, and what are the Fed’s thoughts on whether that’s a risk going forward?” 

Powell’s response (42:06):

“So we do, through our vast network of contacts and just through our observation of what’s going on in the economy, we hear about this a lot. If you listen to the earnings reports for consumer-facing companies that tend to deal with low and moderate-income people, they’ll all say that we’re seeing people tightening their belts, changing products that they buy, buying less, and that sort of thing. And so it’s clearly a thing. It’s also clearly a thing that asset values, housing values and securities values are high, and they tend to be owned by people more at the higher end of the income and wealth. 

“So, how sustainable it is, I don’t know. Most of the consumption does happen by people who have more means. I think the top third accounts for way more than a third of the consumption, for example. So it’s a good question how sustainable that is. 

“The best we can do is to have a price stability and a strong labor market. What we saw, for example, what we saw at the end of the very, very long expansion that ended with the outbreak of the pandemic, we saw that it was 10 years and 8 months or something like that – the longest one in recorded history. In the last two years, most of the largest part of the wage gains were going to people in the bottom quartile, the bottom part of the low and moderate income. So having a strong labor market for a long period of time is really, really good from a social standpoint. It’s helping people at the lower income levels, and that’s what we all want to get back to, but we got to have price stability, and we got to have full employment, maximum employment.” 

Follow-up Question from Christine Romans, NBC News (43:55): 

“And just quickly, you mentioned the housing market remains kind of weak. With these rate cuts that we’ve seen, is there a chance we’re going to see more affordability in the housing market, so more people can maybe enjoy that part of wealth creation? I mean, the average age or median age of a first-time home buyer is now 40 years old. That’s the highest on record.”

Powell’s response (44:10)

“So the housing market faces some really significant challenges, and I don’t know that a 25 basis point decline in the federal funds rate is going to make much of a difference for people. Housing supply is low. Many people have very, very low rate mortgages from the pandemic period, and they kept refinancing and caught the really low. So it’s maybe expensive for them to move. And 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 a problem. And really, the tools to address it are we can raise and lower interest rates, but we don’t really have the tools to address a secular housing shortage, a structural housing shortage.”