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Opinion
Lisa Abramowicz

The Fed Has a Real Estate Fight on Its Hands

Jerome Powell faces a dilemma: Pull back on mortgage-bond purchases and threaten market stability or watch home prices continue to surge. 

Jerome Powell doesn’t have a housing option with curb appeal.

Jerome Powell doesn’t have a housing option with curb appeal.

Photographer: Graeme Jennings-pool/Getty Images

A fight is brewing at the Federal Reserve about housing prices, and there’s no easy way to resolve it without either spurring record home costs to rise even more or disrupting increasingly complacent asset markets.

Both options are bad for a central bank that has a history of withdrawing accommodation prematurely. The Fed’s hand will be tipped if members determine that high property values are starting to substantially threaten financial stability, which is the subject of a discussion between Fed Chair Jerome Powell and Treasury Secretary Janet Yellen on Friday.