Senator Elizabeth Warren, a Democrat from Massachusetts, left, speaks with Federal Reserve Chairman Jerome Powell during a hearing of the Senate Banking, Housing and Urban Affairs Committee on Tuesday, September 28, 2021 in Washington, DC, UNITED STATES.
Kevin Dietsch | Bloomberg | Getty Images
Sen. Elizabeth Warren, D-Mass., and three other Democratic lawmakers are urging Federal Reserve Chairman Jerome Powell to cut interest rates at the upcoming Fed meeting to make housing more affordable.
“As the Fed considers its next steps in the new year, we urge you to consider the impact of your interest rate decisions on the housing market,” the senators wrote in a letter to Powell on Sunday.
“The direct impact of these astronomical prices has been a significant increase in the overall cost of purchasing a home for the average consumer,” the letter said.
High housing costs have contributed to declining public opinion about the economy, a top election issue that has weighed on President Joe Biden’s 2024 reelection campaign.
But in December, the Fed suggested there could be three rate cuts in 2024 as inflation cools, which has already helped improve consumer sentiment about the economy.
The Fed’s December forecast was a sigh of relief for the housing market, which has been under pressure in recent years due to a combination of record-high interest rates and persistent supply constraints. Mortgage demand rose sharply in January, a sign that homebuyers are returning to a market they had been wary of for months.
At the start of the pandemic, the Fed slashed interest rates and demand for housing increased as people hunkered down at home. That sent real estate prices soaring, but when inflation set in, the Fed raised interest rates to record highs.
These interest rate increases, coupled with a severe lack of supply, have caused property prices to skyrocket even further in recent years.
This expensive real estate market depressed demand as many homebuyers took a wait-and-see approach, hoping prices would fall. Seller activity also stagnated as there was little incentive to exchange their lower mortgage contracts for the current higher interest rate.
The buyer-seller stalemate could finally ease if the Fed sticks to its rate-cutting plan in 2024.
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2024-01-29 19:57:14
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