Fed Chair Says Housing 'Much Smaller' Part of Economy Now

In a second congressional hearing this week, Federal Reserve chair Jerome Powell explained to the House Committee on Financial Services that housing has less of an impact on monetary policy now than in the past.

Powell said that as housing is a "much smaller" component of the economy, the nation's economy is much bigger than in the past, and as a result, housing does not hold as much weight in determining monetary policy decisions. The Fed chair added that stressors on the housing market are due to supply-side concerns like labor tightness and rising costs, which the Fed can't fix, HousingWire reports. Powell advised that it is for Congress to address these issues, and should consider, "Did restrictions on credit availability [for homebuyers] go too far?"

As far as the current state of the housing market, and its ability to withstand a recession, Powell explained that, “In housing now, we do see that most of the borrowers now have higher credit scores so it’s a different market. If there’s a downturn we’re better prepared for it.” In fact, he went further to tell Rep. Josh Gottheimer, D-N.J., that a good question Congress should be asking is: Did restrictions on credit availability go too far? He explained that while restrictions were necessary due to the bad decisions made in the lending sector, but asked: Was it done at the right level? “It’s not too soon to be looking at that,” Powell said.

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