The Federal Reserve delivered its first interest rate cut in more than four years yesterday. It was a declaration of victory over once hot, hot, hot inflation. And mortgage rates responded by fluctuating in kind of a weird way. The average 30-year fixed weekly rate dropped from 6.2% to 6.09% and the daily rate rose from 6.15% to 6.17%. They might seem like tiny changes, but it matters to anyone who wants to buy a home—think of the total cost of a mortgage over its 30-year lifespan.
But there is a fight that the central bank hasn’t won. Although it might not be its fight at all.
During a post-meeting press conference, Fed Chair Jerome Powell was asked if interest rate cuts would reignite demand in the housing market and send prices soaring—again. His answer was telling: once mortgage rates come down, the lock-in effect will ease. People will start to sell their homes, and when they do, they’ll buy homes, too. So it isn’t clear how much extra demand the cut could trigger. To him, it seems that piece only side-steps the crux of the country’s housing crisis.
“I mean, the real issue with housing is that we have had and are on track to continue to have not enough housing, and so it’s going to be challenging,” Powell said. “It’s hard…to zone lots that are in places where people want to live…All of the aspects of housing are more and more difficult, and you know, where are we going to get the supply? And this is not something that the Fed can really fix.”
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https://fortune.com/2024/09/19/jerome-powell-fed-cant-fix-housing-crisis-mortgage-rates/