The housing market can be described as expensive and offering little choice. That is the result of years of very cheap mortgages, largely engineered by The Fed, and the existence of the 30-year fixed mortgage, also made possible by government policy. The figure shows the 30-year fixed mortgage rate, which hit record lows during the pandemic and is now back to historical averages. The current rates are more than doubled what rates were a few years ago. The result is many Americans have locked in a low mortgage payment and can't afford to move. Meanwhile, supply is constrained, which keeps prices high. Ownership will be expensive and inaccessible for people looking to buy, and moving will be impossible for current owners. This will make the economy less dynamic and impact wealth creation for years to come.
Source: ST. LOUIS FED
Allison Schrager is a senior fellow at the Manhattan Institute. Follow her on Twitter here.
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