Sen. Elizabeth Warren, D-Mass., and three other Democratic lawmakers are pushing Federal Reserve Chairman Jerome Powell to lower interest rates at the upcoming Fed meeting to make housing more affordable.
“As the Fed weighs its next steps in the new year, we urge you to consider the effects of your interest rate decisions on the housing market,” the senators wrote in a letter to Powell Sunday.
“The direct effect of these astronomical rates has been a significant increase in the overall home purchasing cost to the average consumer,” the letter said.
Expensive housing costs have contributed to lagging public sentiment on the economy, a top voting issue that has weighed on President Joe Biden’s 2024 reelection campaign.
But in December the Fed indicated that three rate cuts could come in 2024 as inflation cools, which has already helped lift consumer attitudes on the economy.
The Fed’s December forecast was a sigh of relief for the housing market, which has been under pressure over the past few years due to a combination of record-high rates and a lingering supply shortage. In January, mortgage demand surged, a signal that homebuyers are returning to a market they have been wary of for months.
At the start of the pandemic, the Fed massively cut rates and housing demand rose as people hunkered down at home. That sent housing prices soaring, but when inflation kicked in the Fed hiked rates to record highs.
Those rate increases coupled with a severe supply shortage have led housing prices to skyrocket even further over the past few years.
That expensive housing market squashed demand as many homebuyers adopted a wait-and-see mentality in hopes that prices would come down. Seller activity was also in a lull given that there was little incentive to swap their lower mortgage contracts for the current higher rate.
The buyer-seller freeze could finally ease if the Fed sticks to its rate-cutting plan in 2024.