Christopher Waller, Speech:  The Red Hot Housing Market: the Role of Policy and Implications for Housing Affordability

“Longer term, many issues will continue to put upward pressure on home prices and rents. The strong demand to live in cities with tight housing supply is likely to continue. Regulatory supply constraints may be starting to ease in some places, but they will persist and continue to limit home building in many high demand areas. And while prices for lumber and other materials may come down, with the economy already at maximum employment and experiencing a shortage of skilled workers, labor supply will likely continue to hold back the pace of new construction.”

“As housing costs continue to increase, housing will likely become an ever-larger share of household budgets. This is not a recent development. In 1972-1973, the average household spent 24 percent of expenditures on rent or imputed rent. This share rose to 27 percent in the late 1980s, and in 2019 that was up to 35 percent. No doubt the share in 2022 will be larger still. With housing costs gaining an ever-larger weight in the inflation Americans experience, I will be looking even more closely at real estate to judge the appropriate stance of monetary policy.”