Fed Comments: Slowdown in Housing Shouldn't Slow Consumer Spending

St. Louis Federal Reserve President William Poole commented on the state of the U.S. housing market on Wednesday at a breakfast meeting of the Regional (St. Louis) Chamber and Growth Association.

Specifically addressing the potential effects of a housing slowdown on consumer spending, Poole said, “The marginal contribution to the pace of consumer spending stemming from the wealth effect — that is, from households extracting a portion of their home equity to spend on goods and services — is not likely to be a significant concern.”

Poole said that he felt a housing slowdown in the U.S. this year was not a given. “My hunch…is that housing activity will stabilize and remain at a high level this year,” said Poole. “I base this forecast on the belief that the FOMC (Federal Open Market Committee) will keep underlying inflation low and stable, and that the growth of real household income will recover nicely due to the waning influence of last year’s spike in energy prices. Continued healthy job growth will also help keep housing conditions at a high level.”