The problem is that food prices are insanely high, home prices are insanely high, rent is insanely high, etc. Incomes haven't kept up with inflation, especially asset price inflation, and economic inequality is as bad as it has ever been.
And this situation developed while unemployment rates were generally low (except during the pandemic). I think we're focusing on the wrong measures.
[1] https://www.americanprogress.org/article/workers-paychecks-a...
[2] https://www.cnn.com/2024/01/30/economy/rent-prices-dropping-...
> 57 percent earned higher annual inflation-adjusted wages than the year before
Which means 43 percent did not, which isn't that good.
And the housing situation in particular is worse, when you consider that that year-over-year CPI increase was 3.1%, but "S&P Dow Jones Indices’ CoreLogic Case-Shiller national home price index rose 5.1%"[1] over the same time. IOW, most workers' wages have fallen relative to home prices.
> Young adult workers ... have seen their real median wage rise 12 percent since the onset of the pandemic
The CPI since early 2020 has risen about 20%, so those wages, before adjustment, must have risen about 35%. But "U.S. home prices are now up 45% since March 2020, the early days of the pandemic."[1]
1: https://www.msn.com/en-us/money/realestate/us-home-prices-ar...
Other sources paint a different picture; real median personal income is flat[0] (really, within $60 a year), and real median household income is lower[1], compared to pre-pandemic.
Food prices, rent - true they are high, but there is hope. Average hourly earnings are growing faster than inflation since early 2023.
Home prices - these will fall when interest rates fall, which can only happen when the Fed sees inflation fall a bit more. While employment is high and inflation moderate (like it is now), the Fed is reluctant to cut rates.
Incomes and inflation - didn’t keep pace in 2021 and 2022, but they did in 2023.
Economic inequality - reduced in the last few years, mainly because lower wage workers have seen bigger raises than high wage ones.
This means that we are discussing the right metrics (employment, growth, inflation), because the one you care about are downstream of these. And the right metrics have looked good for about a year.
Please explain the mechanism by which lower payments on bigger loans will reduce home prices.
This is the opposite of what will happen. Homebuyers express their housing budget in the amount they can spend each month. That then translates to a home price. If rates come down, that budget translates to a higher home price. (All things equal, if a buyer has already decided to spend $X, they are not going to spend 0.8 * $X to get a lesser place just because rates have come down.)
When rates come down, houses are going to get still more expensive.
But high interest rates isn't making things affordable because first time buyers can't afford a mortgage at those rates.
Fiscal policy means government taxation and spending - subsidies for home building would be a fiscal policy and would help.
I think you mean no monetary policy can help.
Even there I disagree. Easy money mostly flowed into the hands of the wealthy, who then bought homes as investments, driving up home prices to the point that average people couldn't afford to buy them to live in.
I know we are and obviously it's intentional.