Federal Reserve Chair Powell said to the Senate Banking Committee multiple times that he believes the U.S. housing market is undersupplied and will remain so for years to come, even after rates are lower.

Here are a number of quotes from Powell:

“There are two big things going on. One is we have this big underlying shortage of housing and it’s due to things like difficulties in zoning. . . . It’s more difficult [for builders] to get people [labor] and materials. Then there are a ton of things happening because of the pandemic and because of inflation, because of higher rates, and those in the short-term are weighing on the housing market. But as [mortgage] rates come down, and that all goes through the economy, we’re still going to be back to a place where we don’t have enough housing.”

“The housing market is in a very challenging situation right now. You have this longer-run housing shortage, but at the same time, you have a bunch of things that have to do with the pandemic and inflation and [the Fed’s] response with higher rates. You have a shortage of homes available for sale because many people are living in homes with a very low mortgage rate and can’t afford to refinance, so they’re not moving, which means the supply of regular existing homes that are for sale is historically low and a very low transaction rate. That [all] actually pushes up the prices of other existing homes and also of new homes because there’s just not enough supply.

“The builders are pushing, but they’re running into all kinds of supply issues still around zoning and workers and things like that,” he added. “I will say the first problem is a longer-run problem. The other problems associated with low rate mortgage [lock-in] and high [mortgage] rates and all that, those will abate as the economy normalizes and as rates normalize. But we’ll still be left with a housing market nationally where there is a housing shortage.”

“There are very, very few [office] transactions in commercial real estate right now, especially in the troubled areas,” Powell said. “So it is not a question of prices still falling, it’s a question that you don’t have that kind of price discovery, you just have to assume that prices are very low and gone down a lot. In commercial real estate, we have a secular change in people working from home. That is one big part of it that means in many cities the downtown office district is underpopulated, there are empty buildings in many major and minor cities. It also means all the retail that was there to service the thousands and thousands of people who worked in those buildings are under pressure too. And banks will have made loans to many of those buildings, not all of them but many of them.

“This we have known for some years,” he continued. “And so what do we do? We [the Fed] have identified the banks that have high commercial real estate concentration, particularly office and retail and other ones that have been affected. We identify them and we are in dialogue with them: ‘Do you have enough capital? Do you have enough liquidity? Do you have a plan? You’re going to take losses here. And are you being truthful with yourself and your owners?’ And so we’ve been working with them. For some time we’ve been doing that.”

Powell added: “This [commercial real estate trouble] is a problem we’ll be working on for years more I’m sure. And there will be more bank failures. But this is not the big banks. . . . It’s more small and medium-sized banks that have these issues.”