Fed Warns About a 'New Housing Crisis'

October 14, 2016

The Federal Reserve says it is worried that the shortage of homes for sale could stall the housing recovery and take a toll on the economy. In its minutes released from September, the Fed talks about its concerns over the "new housing crisis," saying the housing market was starting to look weak and "real residential investment spending continued to be soft in the third quarter."

"A couple of participants pointed to limited availability of lots and a shortage of skilled labor as restraining residential construction activity in their Districts; in one District, constraints on the supply of new homes for sale were expected to boost spending on home improvements and offset some of the drag from the slowing in new construction," the minutes state.

Inventory is not keeping up with demand from younger professionals who are looking for a home, the Fed notes. That is prompting home prices to rise and is pricing first-time home buyers out of the market. Economists are anticipating the Fed's next policy meeting, slated for Dec. 15 and 16, when many forecasters predict it will raise its benchmark federal-funds rate from near-zero. 

Source: “The Fed Has its Eye on the ‘New Housing Crisis,’” Business Insider (Oct. 12, 2016)