Should Homebuyers Follow Chairman Powell’s Advice?

Two weeks ago Fed Chairman Powell finally addresses the impact on housing by the huge increase in mortgage rates. He did say the Fed is not sure how higher mortgage rates will impact housing construction or how much higher rates will impact housing prices. But, they are watching this carefully. I find it intriguing that they have no clue on how higher rates will impact this very important sector of the economy and household wealth.

He gave this “advice” to homebuyers, “you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again.” This sounds like a good advice; but let’s really think about what he said.

As I have been writing and teaching for years I don’t see supply and demand for housing coming back in balance probably EVER as our country is short by 4 to 6 million homes and I don’t see this number ever becoming zero or in balance. Second, I don’t see inflation dropping to 2% in the near future as I fully expect energy prices will remain elevated for at least another 2-3 years and higher energy prices seep through the entire economy. I am just hoping for inflation of 4% to 5% by end of 2023.

Thus, waiting for these 2 things to happen may be many years or decades away and do you really want to be a renter for this long? Do you want to miss out on the wealth creation that happens with owning real estate? Personally, I think Chairman Powell is as right on this topic as he was about inflation being transitory last year.