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Danielle DiMartino Booth

The Fed Faces a Housing Conundrum

Artificially repressed interest rates have perverted what was once a market driven by supply and demand.

The housing market is strong for all the wrong reasons. 

The housing market is strong for all the wrong reasons. 

Photographer: Joe Raedle/Getty Images North America
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Federal Reserve Chair Jerome Powell may have a problem on his hands. Buoyed by three interest-rate cuts, not only did the U.S. housing market stand as a pillar of economic support in 2019, it largely offset the protracted slowdown in business investment. Now, though, cracks have begun to appear in housing.

Focusing solely on forward-looking indicators of residential real estate, the direct input to gross domestic product, building permits in the South and Northeast, which account for about 60% of permits, fell in December. As for what’s to come on the sales side, pending homes sales fell by 4.9%, the steepest decline in a decade.