All June long we’re going deeper on mortgage and title — looking at where the mortgage market is headed, how products are evolving and alternative financing options changing the game. Join us for Mortgage and Alternative Financing Month. And subscribe to Inman’s Extra Credit for weekly updates all year long.

Federal Reserve Chairman Jerome Powell on Wednesday acknowledged the brutal housing landscape Americans face amid rising prices and skyrocketing interest rates, saying that especially younger would-be buyers need a “reset.”

Powell made the comments during a lengthy press conference where he discussed the Fed’s approval of the biggest interest rate hike in 28 years. The rate hike is meant to combat inflation, which in May reached its highest point in four decades.

Near the end of the press conference, a reporter asked Powell for his take on the real estate market, which has seen steadily climbing home prices and more recently skyrocketing mortgage rates as well.

Powell replied that mortgage rates have been low thanks to the pandemic, but are now “coming back up to more normal, or above, levels.” However, he wasn’t sure what that would do to prices.

“The supply of finished homes, the inventory of finished homes that are for sale, is incredibly low,” Powell also said. “Historically low. So it’s still a very tight market. So prices may keep going up for a while even in a world where rates are up.”

Either way though, Powell described the current market as “a complicated situation.” And, significantly, indicated that something needs to change for more people to start climbing the real estate ladder.

“I would say if you’re a homebuyer, or a young person looking to buy a home, you need a bit of a reset,” Powell said. “We need to get back to a place where supply and demand are back together. And where inflation is down low again and mortgage rates are low again. So this will be a process whereby ideally we do our work in a way that the housing market settles in a new place and housing availability and credit availability are at appropriate levels.”

Powell did not elaborate further on what a potential “reset” would look like. His comment about “credit availability” in the housing market was clearly a reference to mortgage rates. That comment, as well as his earlier remark about mortgage rates being “above” normal levels, could theoretically be interpreted to mean that today’s suddenly elevated rates won’t be the new normal forever.

In any case, what is happening now with inflation and mortgage rates is unlike anything most practicing real estate agents have experienced in their careers. On Friday, the Labor Department’s latest report showing higher-than-hoped-for inflation triggered a bond market sell-off. That in turn sent mortgage rates climbing even higher, and by early this week average 30-year fixed rate loans were topping 6 percent.

Mortgage rates have been higher in the distant past. Freddie Mac data shows, for instance, that in the early 1980s average rates topped 18 percent. But the recent rate hikes have happened at an unprecedented pace, making it harder to immediately parse their impact on home sales and demand.

If it’s any consolation, though, even the experts aren’t sure what is going to happen next, with Powell repeatedly mentioning uncertainty during Wednesday’s news conference.

“We’re well aware that mortgage rates have moved up a lot,” Powell said during the conference, “and you’re seeing a changing housing market. We’re watching it to see what will happen.”

Watch Powell’s full remarks on the housing market here: 

Email Jim Dalrymple II

homebuying | recession
Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×