“Rising home prices are the issue I hear about most often from my constituents.”
“The Fed needs to start lowering interest rates because, like rent, they're too high.”
Watch (YouTube)
WASHINGTON – Today before the House Financial Services Committee, Rep. Ayanna Pressley (Massachusetts, 7th District) grilled Federal Reserve Chairman Jerome Powell, urging him to lower interest rates to improve home affordability and promote the construction of more affordable housing. In her questioning, Rep. Pressley highlighted the negative impact high interest rates have on mortgage prices and home construction and argued for the need to lower interest rates.
You can watch the video of my exchange with Chairman Powell here, and a transcript is below.
Transcript: Rep. Ayanna Pressley urges Chairman Powell to cut interest rates to boost home prices and affordability
House Financial Services Committee
March 6, 2024
Senator Pressley: The Federal Reserve's aggressive rate hikes have pushed mortgage rates above 7%, the highest they've been in 20 years, and many credit-worthy homebuyers ready to take out a mortgage are losing their ability to buy a home. This is a problem for everyone. It's an urban problem, a suburban problem, and a rural problem.
Chairman Powell, I welcomed the Fed's decision late last year to pause interest rates, but for my district and families across the country, it's not enough. The Fed needs to start lowering rates.
Because, like rent, interest rates are too high.
Chairman Powell, you've previously indicated that the Fed may cut interest rates this year. What specific impact do you expect a rate cut would have on the housing market, including the rental, purchase, and construction markets?
Chairman Powell: We know that rising interest rates have slowed economic activity. So, if we start to lower interest rates, we will see the housing market generally recover in new home construction and new home sales. You know, so many households have low-interest mortgages and they can't sell their homes because they have to refinance into higher-interest mortgages. That will unwind over time. So, ideally, we will see the housing market return to more normalcy and we will see lower inflation in the overall economy.
Senator Pressley: Right. And again, you know, lowering interest rates would be a big benefit.
In fact, just yesterday I met with several representatives from state housing finance agencies across the country, and they were discussing the barriers to affordable housing projects in the current interest rate environment. Clearly, rising interest rates are raising costs for affordable housing developers, and many have chosen to slow or stop construction altogether. As a result, fewer homes are being built, which means fewer people can live in them.
You would agree, given that there was already a massive shortage of affordable housing supply even before the pandemic, when interest rates were below 2%. Current interest rates of 5.5% are devastating, and home prices across the country remain stubbornly high.
It's clear that the current housing market situation is affecting everyone and disproportionately hitting those who need stability the most. Is this concerning to you?
Chairman Powell: So, our job is to achieve price stability and maximum employment. We're not targeting the housing market. We're doing our job. That's what we're doing. It's not what we want to do, but this is the path to restoring price stability.
[cross talk]
Senator Pressley: But is Chairman Powell concerned about that?
Chairman Powell: Does that concern me?
Senator Pressley: Yes, less housing is being built, and therefore less people can afford it.
Chairman Powell: This is the job we took on.
Senator Pressley: Well, that's a real concern to me.
Chairman Powell, do you agree that the Fed's rate hikes are an insufficient response to housing inflation and that a stronger fiscal response is needed to increase the supply of affordable housing and lower costs across the country?
Chairman Powell: We don't take opinions, we don't take opinions on anything like that. I will say that we have a structural housing shortage in the United States. And that's really a long-term problem. The problem of high interest rates is a short-term problem. The long-term problem is a supply shortage.
Rep. Pressley: Yes, and that's why it's important that Congress pass legislation, a budget, that makes the investments we need in housing for all.
Given that Senator Waters fought for $150 billion in investment in housing in her Build Back Better plan, I know my colleagues and I are eager to see the Republican majority take housing inflation seriously on this side of the aisle.
Rising housing prices are the issue I hear about most often from my constituents, and families in my district and across the country need relief now.
I sincerely hope the Fed listens to them and cuts interest rates. Thank you. I'll give in.
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