Powell: Housing market has 'a ways to go' before prices cool

Home prices are nearing their peak, but the housing market could have “a ways to go” before balancing out, Federal Reserve Chair Jerome Powell said on Tuesday after the central bank’s decision to raise interest rates.

“There are many people who have low-rate mortgages and whereas they might want to sell in a normal situation, they're not going to because they have such so much value in their mortgage, which means that the supply of existing homes is really, really tight, which is keeping prices up,” Powell said.

Mortgage rates rose rapidly from their historic lows during the pandemic amid the Federal Reserve’s aggressive effort to curb inflation, moving above 7 percent at their peak in November. 

Prices remain high as stubborn mortgage rates are keep would be sellers anchored to their homes, lowering the number of homes for sale, driving prices, and hampering affordability. 

Rates are down slightly from their high point halfway through the year after rising modestly in the weeks following the central bank’s previous decision to pause rate hikes. 

Meanwhile, sales of existing home sales declined in June, falling by 3.3 percent from a month before.  

Existing home sales — completed transactions that include single-family homes, townhomes, condominiums and co-ops — declined 3.3 percent from May to a seasonally adjusted annual rate of 4.16 million, according to data released last week by the National Association of Realtors (NAR). 

“Home sales fell but home prices have held firm in most parts of the country,” NAR’s Chief Economist Lawrence Yun said in a statement. “The national median home price in June was slightly less than the record high of nearly $414,000 in June of last year.    

But Powell acknowledged Tuesday buyers could soon see a reprieve with a record number of new construction coming online over the next year. 

New construction soared past expectations in May before falling in June. Privately owned housing starts fell to a seasonally adjusted annual rate of 1.43 million units last month, down 8 percent from the revised estimate in May at more than 1.55 million.