Fed Chair Powell: Housing market faces significant challenges

Economic Overview - Higher-income households are currently driving consumer spending, supported by home equity and stock market wealth, while lower-income consumers are struggling due to five years of rising prices, which are affecting their purchasing power more than the inflation rate itself [1][2] - The economy is exhibiting a K-shaped recovery, where higher-income individuals are benefiting more than lower-income groups, leading to concerns about sustainability [2][3] Consumer Behavior - Consumer-facing companies report that low and moderate-income consumers are tightening their spending, changing their purchasing habits, and buying less [2] - The top third of income earners account for a disproportionately high share of overall consumption, raising questions about the sustainability of this consumption pattern [3] Labor Market and Wage Gains - A strong labor market has been beneficial for lower-income individuals, with significant wage gains observed in the bottom quartile over the last two years [5] - Maintaining price stability and maximum employment is crucial for supporting lower-income households [6] Housing Market Challenges - The housing market is facing significant challenges, including low supply and high demand, which are exacerbated by the current economic conditions [7][8] - The average age of first-time home buyers has reached a record high of 40 years, indicating affordability issues in the housing market [7] - Structural housing shortages persist, and while interest rate adjustments can be made, they are insufficient to address the underlying issues in the housing market [9]