Powell Grilled on Housing Supply, Owner-Equivalent Rent, and… Grant Cardone

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Fed Chair Jerome Powell testified before the House Financial Services Committee on Tuesday, June 24th. Lawmakers on both sides of the aisle questioned him on the Fed’s rate policy, tariff inflation, housing affordability, and the national debt.

More than one brought up the “One Big Beautiful Bill” and its impact on the national debt, with one pressing Powell (repeatedly) to voice his opinion on it. A few mentioned housing affordability and how high rates are making it hard for their constituents to afford a home.

Some made valid points. One went so far as to bring up Grant Cardone’s statements on Powell. And some of the conversations were easier to watch than others.

We’ve rounded up the highlights, with some commentary by Byron Lazine, who broke down Powell’s testimony on Wednesday’s Hot Sheet. Let’s get into it.

Q&A Highlights from Powell’s Testimony

From housing affordability to Grant Cardone callouts, Powell faced a wide range of questions on Tuesday. Here are the standout moments, plus what Powell actually said in response.

We’re also including some of Byron’s commentary on these conversations.

Rep. Rashida Tlaib (Michigan) questioned Fed Chair Jerome Powell on eviction rates, Black homeownership losses in Michigan, and whether high interest rates are worsening the housing crisis and future supply.

Powell: “So I think there are two things going on quickly. One is just there’s a longer run shortage of housing in the United States, which there’s nothing that the Fed can do about. That’s not something we can affect. There’s also, if I may say in the short run, rates are high and that’s going to weigh on housing activity, but the best thing we can do for the housing market, the absolute best thing is to restore price stability so that rates come down and so that rates can be at a level people can afford.”

Byron gave Rep. Tlaib credit for calling out the impact of high rates on the future supply of housing. From there, the exchange meandered into territory outside the Fed’s purview.

“Congress gives the mandate to the Fed… The mandate is inflation at 2% and maximize employment. The mandate is not maximize housing supply. Jerome Powell and the Fed have clearly stated, ‘we don’t care about homeownership rates.’ Not a concern…

“She really hit on something that was interesting: ‘Hey, your policy [of] higher rates is restricting supply.’ Yes. But then, at the same time, she’s digging further and further on supply when he doesn’t control supply. The laws created in Congress could have a bigger impact on supply than anything the Fed can do.”

Rep. Bryan Steil (Wisconsin) asked Powell to explain how high shelter costs factor into inflation and interest rate decisions, prompting Powell to highlight recent improvements in housing services inflation and persistent supply shortages.

Powell: “So we realize that people are feeling high housing costs and high financing costs. In terms of inflation, we look at something called owner’s equivalent rent and rentals, and that’s meant to capture both rented housing and owned housing and it’s been very sticky. It’s been one of the stickiest parts of inflation. I’m happy to say now it actually is coming down quite regularly. That’s very good news. That’s been the part really, it’s been the service inflation that’s been stickier than other parts of inflation. So that’s good news for people, I think. And it is showing through into measured inflation. Now again, in the long run, the best thing we can do is restore price stability and let the market work. Even then though, we’re still going to have a housing shortage.”

If you’ve been watching Hot Sheet, you’ve already heard Byron explain owner-equivalent rent and why it’s an unreliable data point.

“This is where inflation gets it wrong. [Powell] just said, ‘We look at something called owner-equivalent rent in rentals’ …Owner-equivalent rent is a 1980s survey. A lot of the data comes from regular people, not professionals, and it’s two-year-old data. It’s basically asking homeowners, ‘Hey, what would your current home rent for?’ And it’s been very sticky because you’re not using real-time data. You’re talking to people who aren’t professionals. You’re not using the data that’s available to you in real time… And this is one of the reasons inflation is above the 2% target. It’s the way we analyze the numbers.”

Steil asked a follow-up question: “What data do you think is leading to the reduction of the rent equivalent?”

Powell: “I just think it took time. So the thought is when you would think that if rents come up every year, you would think it would take one year or two years for a lack of growth in rents to show up in a lack of growth in housing prices. It turns out it takes four years or three years. If you’re an existing tenant, it’s a complicated thought, but if you’re an existing tenant, you don’t actually catch up the way you would if new tenants came in. And so that’s made the measurement of inflation stickier. But I’m happy to say we’ve been through that period now and we are really seeing now housing services inflation pretty close to where it was when inflation was solidly at 2%.”

Byron added:

“And if you actually used real-time data, inflation might be lower than 2%.

“What he’s talking about with existing tenants versus new tenants, as we’ve seen in the last 24 months, rental prices have come down. We’re off the 2022 peak on rent prices. So, if you’re a new tenant today, you’ve got more leverage… If you’re an existing tenant and you don’t want to move, you don’t want to go through the hassle of moving, well, you might have in your current lease what you roll over and lock into. And it might be an increase.”

Rep Marlin Stutzman (Indiana) questioned Powell on housing market stagnation, citing Grant Cardone’s critique of Fed policy and emphasizing how current interest rates are keeping Americans “stuck” in place.

Powell: “We see the same thing you do in the housing market. It’s tough. People are locked in. They can’t afford to get out of their house because the cost of getting to a higher mortgage, a higher-priced mortgage, would be a lot. So, the best thing we can do is to get inflation sustainably down to 2% and have it stay there over a long period of time. A long period of time. And that is really what we can offer to them.

“If you go back to the beginning of the pandemic, when we cut to zero and we did all those programs, we really saved the housing industry, because they’re the front line for interest rates. At a time like this, when rates are, I would say, modestly restrictive, not even moderately but modestly restrictive, they feel it. And their customers feel it. We understand that. But we only have one tool for the whole economy, not just for housing. So it’s something we consider, but we have to consider the bigger picture.

“And I do think, in the medium term, as rates come down, you’ll see normalization in housing. Of course, there’ll still be a national housing shortage. I don’t know about your district…”

While Cardone’s comments took a back seat, with no response from Powell, Byron was careful to draw it out and add a few clarifying points.

“I don’t know how Grant Cardone got him to mention his name. One thing you can say about Grant Cardone is he is a master at marketing… He’s obviously put out these critiques of the Fed policy online, but his theory…I tend to agree with it half way—meaning, if rates come down (and let’s call it high-5s, whatever), right now, you’ve got sellers that are still locked up; this would bring a lot of those sellers to the market…creating even more supply, which then brings prices down. I agree with that theory, but I think it’s short-lived. I think those prices come down in a season, or maybe a quarter, maybe 2-6 months. Then, as all the buyers enter the market, it pushes them back up…because ultimately, we have an affordable housing crisis. We have an affordable housing shortage.

Rep Stutzman followed up with “Considering the macroeconomics of interest rates, how much consideration do you take housing into that decision as you address interest rates?”

Powell: “We always talk about it, we always look at it, but at the end of the day it’s the big US economy, the whole aggregate thing that matters. We also talk about the agricultural economy a lot as well, but ultimately—and manufacturing—it’s got to be the whole and not any one particular piece.”

Byron again pointed out that, ultimately, the folks in Congress complaining to Powell about the housing crisis have more control over housing supply than Powell and the Fed do.

“Congress sets the rules for the Fed. So, Congress complains to Jerome Powell about housing. Because when you’re a congressperson, you hear from people and your local constituents; they want the American dream. We know this. Real estate professionals across America know this. People in your community want the American dream…

“The thing is Congress likes to complain about housing because it gets them points with their voter base. But the Fed doesn’t control housing… Congress, why don’t you do something about housing supply? You could create even less regulation. You guys are all local people, but yet the local municipalities are backwards when it comes to housing regulations.”

Rep Monica De La Cruz (Texas) pressed Powell on elevated mortgage rate spreads and the Fed’s MBS runoff policy.

Powell: “I don’t think that runoff of MBS is a particularly large contributor to that situation. I also think it’s not just interest rates, it’s so many things around housing now. It’s insurance, it’s materials, it’s land acquisition, it’s labor. There’s so many cost pressures that are pushing up housing costs.”

Those are the highlights from Day One of Fed Chair Jerome Powell’s testimony before Congress. Housing may not be the Fed’s top priority, but it’s clearly becoming harder to ignore.

Sarah Lentz | Jun 25, 2025 | Housing Market

https://nowbam.com/powell-grilled-on-housing-supply-owner-equivalent-rent-and-grant-cardone/

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