“The housing sector … has shown little recent progress,” Fed Chair Janet Yellen said today in prepared remarks for the Senate Banking Committee. “While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year’s increase in mortgage rates – and readings this year have, overall, continued to be disappointing.”
The rate spike to which Yellen referred happened in large part because of her own organization. Rates, which had been at near-historic lows, rose more than a full percentage point last year when the Fed began considering an end to its bond-buying stimulus program.
But rising rates don’t tell the whole story, according to the Fed’s Monetary Policy Report, released today.
“Historical correlations between mortgage rates and residential investment suggest that the effects of last year’s run-up should have begun to fade by now, but housing activity has yet to pick up,” the report said.
The report said that the continuing increase in house prices and the persistent lag in new-home construction are also choking the market.
The head of the Federal Reserve says the housing recovery isn’t moving fast enough – due in part to last year’s mortgage-rate spike.