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Federal Reserve economist: U.S. economy resilient but housing affordability, inflation risks remain
Summary
Sonia Waddell of the Federal Reserve Bank of Richmond told the Virginia Housing Commission that overall U.S. growth has been resilient but housing affordability remains strained, inflation progress has moderated and risks such as tariffs and federal spending changes could affect Virginia.
Sonia Waddell, an economist at the Federal Reserve Bank of Richmond, briefed the Virginia Housing Commission on March 4, saying the U.S. economy has remained resilient while several risks persist for inflation and housing affordability.
Waddell said national gross domestic product expanded about 2.5% last year and the fourth quarter rose roughly 2.3%; Federal Open Market Committee participants’ median projection for the year ahead was about 1.7%. “My views are mine and not the views of the Federal Reserve Bank of Richmond or the Federal Reserve System,” Waddell prefaced her remarks.
Waddell highlighted that core personal consumption expenditures (PCE) inflation was running near 2.8% year‑over‑year (core PCE strips out food and energy), and that housing services remain a notable component of inflation. Waddell said some market rent indicators have softened recently and that contribution from housing to headline inflation could moderate in the short term, but that core services excluding housing has proved more persistent.
On employment, Waddell said the U.S. added solid monthly jobs recently (for example, adding around 151,000 jobs in February) and that Virginia’s employment trends largely tracked national patterns, though some sectors (professional and business services and accommodation and food services) showed early softening in February 2025.
Waddell also discussed housing market indicators: inventories of existing homes remain low by historical standards, house‑price growth peaked in Virginia at roughly 18% year‑over‑year during 2022 and median sales prices in Virginia were cited near $403,500. She said affordability metrics have worsened since 2022 — some measures now show housing costs consuming 40%–50% of median household income in many metros, up from about 30% historically.
Waddell warned that tariffs and trade policy, geopolitical shifts that encourage reshoring, and wage dynamics are potential headwinds for disinflation. She also described work the Richmond Fed is tracking about federal employment and contract dollars in Virginia and noted that unemployment insurance claims for federal employees (UCFE) had shown some increases but were not at levels seen during past fiscal shocks.
Commission members asked about practical policy levers. Delegate David Bulova pressed on local authority to require affordability at rezoning; Waddell deferred to local legal authority but emphasized supply and productivity improvements in construction as part of longer‑run affordability solutions. Delegate Adele McClure asked about innovation in housing; Waddell said the Richmond Fed has begun cataloguing promising approaches and offered to follow up with examples.
No formal action was taken; the presentation was informational.
