US Treasury Secretary Says Housing Prices May Take More Time to Fall

Inflation will likely move lower, though it may take a while for housing costs to fall in line, Treasury Secretary Janet Yellen told the House Financial Services Committee Tuesday.

In a wide-ranging testimony, Yellen addressed the U.S. economy, telling lawmakers that the inflation spike in 2022 was mainly the result of global supply chain issues that affected economies around the world. She said she expected inflation to continue to fall from the 2.6% rate shown in the most recent Personal Consumption Expenditure (PCE) report. 

“Many of those supply issues are now fully resolved, so much of the pressure has diminished,” Yellen said. 

However, rents and housing costs are likely to remain at elevated levels for some time, Yellen said. Elevated prices and the high interest rates designed to fight them have made housing prices rise over the past few months.

“It will be a while before housing costs come down to a more normal level,” Yellen said. 

High mortgage rates have thrown a wrench into the housing market. Sellers are hesitant to put their homes on the market because of their unwillingness to give up fixed mortgages they secured when rates were low. The lack of homes for sale has pushed prices higher.

Renters aren’t much better off. Rent is taking up a larger portion of wages nationwide and those with leases are becoming more cost-burdened, according to the Harvard Joint Center for Housing Studies.

Economists have said that measures of housing inflation lag about a year behind actual prices and that other measures of the market show decreasing costs for home buyers and renters.