This week, Fed Chair Jerome Powell testified before Congress on the state of the economy. During the testimony, Powell provided updates on how the Fed plans to curb inflation after skipping a rate hike last week.
Let’s take a look at what this means for the housing industry.
Jerome Powell’s Housing Testimony
It’s clear that the Fed believes the economy has a long way to go to fight inflation. As far as housing, Powell stated there is an overall cooling of the housing market.
Overall, it’s a slowing in the housing market. I think what you will see, many forecasts call for the increase in housing prices to slow pretty significantly now. You’ve seen very, very large…increases in housing prices since the beginning of the pandemic, to the point where, all over the country you have, you know five bids above the ask the second the house comes on the market. Well, that’s cooling off now to a more sustainable pace.
While many markets are continuing to a lot of competition for affordable homes (especially move-in ready properties), there are signs that demand will begin to slow in the second half of the year, primarily because higher mortgage rates are keeping buyers and sellers on the sidelines.
In addition, Powell states the Fed wants to create a better balance for the housing market. But without a solid plan for creating more affordable inventory, that will be a challenging task.
Hot Sheet Recap
In addition, Jerome Powell’s testimony on the state of the economy host Byron Lazine discussed the top news stories for the housing industry on The Hot Sheet —real estate’s only live daily show.
Here’s everything you may have missed:
Builder Sentiment Increases for the First Time in Almost a Year
Since the markets were closed for the holiday on Juneteenth, Byron started off the week on Tuesday with a housing inventory update from Housing Wire.
From there, he shared some good news for home builders, including increased builder confidence in May, according to the National Association of Home Builders. One reason for the boost in sentiment could be the latest numbers for new construction, with May 2023 showing an increase in housing starts.
Click any of the timestamps below to watch
Is the U.S. Government About to End House Flipping?
Rent growth is a big topic of conversation this year, in part because shelter is the largest contributor to the monthly all items increase on CPI reports. But, as Byron discusses, industry reports continue to show rent growth deceleration, including the latest report from CoreLogic.
Byron continues Wednesday’s show with data looking a multi-family housing and why leaders are looking at house-flipping practices before ending with a mortgage update from Mortgage Bankers Association.
Watch any of the segments here:
- 01:45 Rent growth deceleration
- 08:29 Multi-family housing
- 13:53 House flipping
- 22:33 Mortgage update
Jerome Powell’s Housing Testimony
Thursday’s show started with a recap of what Jerome Powell shared about the housing market during his testimony to Congress. From there, Byron discussed KB Home’s cancellation rate—which shows more promising news for home builders—and Mortgage Banker Association’s home price outlook.
Tune in here:
- 01:15 Jerome Powell’s testimony on the state of the economy
- 13:05 KB Home’s cancellation rate
- 15:58 Mortgage Banker Assocition’s home price outlook
Will office buildings cause a financial meltdown?
While the residential housing market remains strong, the commercial real estate market is continuing to see plunging prices for office buildings. Byron Lazine discusses how the commercial real estate sector could impact the economy over the next several years. Plus, May’s existing home sales report from the National Association of Realtors® and Realtor.com®’s 2023 housing forecast revision.
Watch any of the segments below:
- 01:16 NAR’s existing home sales report
- 12:04 Realtor.com’s revised housing forecast
- 17:42 The fate of office buildings
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