Source: Housing Wire —
When Federal Reserve Chairman Jerome Powell talked about a housing reset in June, it sent shockwaves around the country because it sounded so ominous. In the most recent FOMC meeting, held last week, Powell finally clarified what he meant by that term and what a housing reset means to the Fed. However, a housing reset isn’t the only pressing issue — we now also have to think about a worldwide global recession.
To put it as simply as I can, the strength of the U.S. dollar is causing too much pain worldwide, and traditionally something breaks when this happens. China is in a mess, Europe has an energy crisis, and the wild card of Russia’s war in Ukraine is still unresolved, all while the Fed is aggressively hiking rates. Savagely unhealthy is no longer just a term for the U.S. housing market — it now applies to the world economy.
As I noted during my recent podcast on HousingWire, things are getting sloppy in the markets, and when chaos happens, you can’t ever be sure how bad the damage is going to be. Over the weekend, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said, “We are going to do all that we can at the Federal Reserve to avoid deep, deep pain.” It’s never a good thing when you have to qualify pain like that.
What a housing reset means
Let’s take Chairman Powell’s words from the FOMC’s Q&A session on Sept. 21 and discuss what a housing reset means.
Powell: So when I say reset, I’m not looking at a particular, specific set of data or anything…
This isn’t true (just look at his next statement, below) — he really wants the bidding wars to end, and for total inventory to grow and regain balance. I can understand this mindset. As you can see below on the NAR total inventory chart, we didn’t have a seasonal push in inventory in 2020, which left us vulnerable to price growth that was above the historical norm.
