Powell Warns Certain US Regions May Face Mortgage Deserts in Next Decade

During a recent testimony before Congress, Federal Reserve Chairman Jerome Powell forecasted that certain regions in the U.S. may become mortgage deserts within the next 10 to 15 years due to the insurance industry's instability. As climate change exacerbates natural disasters, major insurers, including State Farm, are withdrawing from high-risk areas like coastal zones and fire-prone regions, leading to significant policy cancellations. This trend restricts homeowners' options, forcing them to rely on state-backed insurers, which often offer higher premiums and limited coverage. Powell emphasized that the withdrawal of banks and insurers from these markets will make obtaining mortgages increasingly difficult. He also addressed broader housing affordability issues, noting that while interest rates may normalize in the future, the underlying problem is a lack of housing supply, which is beyond the Fed's control. Senator Tina Smith highlighted the alarming rise in insurance rates attributed to extreme weather, reinforcing Powell's warnings about the potential consequences for mortgage availability.