WASHINGTON (Pakistan Point News / Sputnik - 15th July, 2021) House prices in the United States have hit record highs because of limited supply and an explosion in demand, not because banks were giving out loans recklessly, Federal Reserve Chair Jerome Powell said on Wednesday.
Material shortages, such as lumber, have curtailed home building and restricted the number of available homes on the market while low mortgage rates have enticed those looking to move out of large cities and buy larger homes in the suburbs, Powell said.
"It's not reckless, irresponsible lending" similar to the run-up to the 2007-2008 financial crisis, Powell told Congress in his semi-annual testimony on monetary policy.
The median existing house price accelerated a record 23.6 percent from a year ago to an all-time high of $350,300 in May, with sales remaining skewed toward bigger and more expensive homes.
Powell said the Federal Reserve is not trying to provide support directly to any industry, including the housing industry.
"Yes, low mortgage rates do indirectly or directly support the housing industry. But it's not that we're looking at the housing market and thinking this is for the housing market. It's really more that we want to support overall demand, And we want to support them, because we're still a long way from maximum employment and we think it's appropriate," Powell added.
Ensuring maximum employment is one of the Federal Reserve's two mandates. The other is to keep inflation at a sustainable rate that is not harmful to the economy, typically at around 2 percent a year.
