Federal Reserve: signs abound that housing market is entering bubble territory

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:A lotta speculators, investors, people who bought at peak FOMO, and RE agents are in denial ITT. The Federal Reserve must be wrong when they use the B word. Prices on assets only ever go up, amirite?

Clickbait gets the clicks, amirite?

What specifically do you think is going to happen to “pop” this “bubble”?

Not the PP, but who knows. Could be anything. We won’t know until we know.

I’m more worried that we have an “all asset” bubble that will take stocks down too. The minor stock market correction earlier this year didn’t affect things much.

+1. Ever hear of credit default swaps before 2008? Because that is what really caused things to go nuclear. Yes, in 2007–8 there was an increase in foreclosures (FOMO ended in 2006, people couldn’t afford the crazy mortgages they took out at the same time prices were declining, and those people who couldn’t afford their payments also couldn’t sell for what they bought so they walked away), but it was the liquidity crisis caused by banks doing risky things with mortgage products that really caused the tailspin. That is what caused the 2008 crisis (Lehman and Bear Stearns going under, etc) that caused recession and job loss, which is what really caused the vast majority of foreclosures in 2008-12. Do you really think banks have stopped taking risks? And do you really think normal people stopped taking risks, too? Just look at all the crazy stuff investors are doing right now to get into real estate. Normal people quitting their jobs, taking out HELOCs and cash out refis on multiple houses, etc.

Right now we are already on the brink of a recession. For two years people have been FOMOing into houses they can’t afford. Prices are way out of line with incomes. Banks will loan you way more than you can afford (not everyone will be smart enough not to buy at the top of their preapproval, especially when OMG I have to buy now or less be priced out forever, homes only go up!).

Being “house poor” doesn’t mean people “can’t afford” their homes.

How are they going to default on their loans? Lose their jobs while unemployment is crazy low?
[u]
Market cooldown <> bubble popping.

Some people can't wait 10-12 years for their house to recover its value. They may have a sickness that prevents them from working. They may be downsized from their government job as the federal government continues to contract its workforce. They may need or want to move for professional or personal reasons (this is especially true in DC, which is a highly transient area). Those people will be underwater on their mortgages if there is a significant correction. You don't need a single dramatic precipitating event to cause people to flood the market trying to get some value out their houses as prices begin to descend. A few underwater properties can affect the entire local market.

It's also important to understand that, although a small proportion of buyers in any housing market always end up overextended and get forced into foreclosure, there are many more people overextended in this market right now than is the norm. This is because the combination of (1) pent up desire to move during Covid lockdowns; (2) the increased premium placed on larger homes and outdoor spaces during lockdowns; (3) the incredibly low interest rates, and (4) the feeding frenzy buyers' market this last year all mean that many, many more people over-spent this year (eg spent more than 28% of their salary on their mortgage and/or threw every penny of their available cash into the down payment). As a consequence of these buying behaviors, you would expect to see an increase in the number of foreclosures this year or next, even if housing prices held steady. If prices do not hold steady, then when those more-than-usual number of foreclosures or forced sales hit the market, those sellers will be underwater in their mortgages. Those over-extended forced sales at underwater prices (along with the other kinds of forced sales mentioned above) could potentially cause a housing price cascade.

Of course it is difficult to know the timeline for this, but the feeding frenzy has already showed signs of stopping this week. The next step will be price growth slowdown, then growth decline, then price stabilization, then price downturn. How quickly this develops and how dramatically it affects the overall housing market will depend on how much people panic. It could be a small plateau of correction, or it could be a steeper, longer decline. A lot depends on what else is happening with the economy at the same time, and what happens with interest rates.

There's a lot of typing here, intelligently worded, thoughtful, and valid as an opinion, but there is no data citing any of your claims. Can you post some?

[Anonymous]

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

The article isn't clickbait. The headline is clickbait. As it is in all clickbait. Once you have read the headline and clicked the article, transaction over.

The headline is, at a minimum, slightly misleading for the reasons shown in the post before yours.

[Anonymous]

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

+100. People on DCUM do not understand what the Fed is, apparently, but that doesn't stop them from commenting. I love the ones who refer to the statements as written by the "staff" of the Dallas Fed, like an unpaid intern is churning out Fed statements instead of Federal Reserve economists. But I guess it's kind of relators' job to try and "alternative facts" up this information to try to keep people buying as long as possible? It would be more effective if they knew what the Fed was though.

[Anonymous]

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I don't know how closely you follow the Fed, but when they issue a statement like this it has been vetted by dozens of highly-trained economists. The Fed is incredibly careful not to be alarmist or to overstate economic conditions. The Fed is acutely aware that every single tiny signal that it sends out into the world will have enormous consequences in the market. This is because major market participants know (A) that the Fed knows what its talking about, and (B) the Fed also has the power to effect the market through its manipulation of interest rates. So if the Fed thinks there is a bubble, there is a bubble. If the Fed saysthat there is a bubble, there is a VERY BIG bubble. This is the kind of warning that could spook not only the housing market, but the entire economy. They would not issue this warning if there wasn't a desire reason to do so. And here is part of what they said:

"[The Fed] also found that the surge in disposable income due to pandemic-related fiscal and monetary stimulus, as well as reduced household consumption because of mobility restrictions, may have lessened its usefulness as a gauge -- suggesting that any bubble may be more advanced than those numbers suggest. "

What they are telling market participants is that they should not rely on the typical measure of price-to-income ratio to evaluate the health of the housing market. They are literally saying that the bubble is worse than most experts are likely to appreciate, which is why they are issuing the warning. This is the Fed equivalent of yelling "FIRE" in a crowded theater. They would not spook the market like this unless they absolutely felt it was necessary because people are not appreciating the impending danger.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Right but the money printing occurred and how much of the recent housing prices are simply a result of inflation?? Would housing prices decrease during a time of continued inflation?

Agree some unprecedented events took place. Especially the printing press and checks sent out to everyone. Also the low rates. While I definitely question this FOMO real estate market we are in, I’m not convinced there will be any sort of crash.

The federal reserve was literally buying billions upon billions of MBS. The recent housing price bonanza has hugely been influenced by the Fed. The Fed can giveth, and the Fed can taketh. Consumers kept buying at these stupid prices because there was so much access to easy, cheap credit. Watch what happens when it dries up, or investors who pay all cash get cold feet due to an economic recession. CRASH AND BURN is what you'll see.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I don't know how closely you follow the Fed, but when they issue a statement like this it has been vetted by dozens of highly-trained economists. The Fed is incredibly careful not to be alarmist or to overstate economic conditions. The Fed is acutely aware that every single tiny signal that it sends out into the world will have enormous consequences in the market. This is because major market participants know (A) that the Fed knows what its talking about, and (B) the Fed also has the power to effect the market through its manipulation of interest rates. So if the Fed thinks there is a bubble, there is a bubble. If the Fed saysthat there is a bubble, there is a VERY BIG bubble. This is the kind of warning that could spook not only the housing market, but the entire economy. They would not issue this warning if there wasn't a desire reason to do so. And here is part of what they said:

"[The Fed] also found that the surge in disposable income due to pandemic-related fiscal and monetary stimulus, as well as reduced household consumption because of mobility restrictions, may have lessened its usefulness as a gauge -- suggesting that any bubble may be more advanced than those numbers suggest. "

What they are telling market participants is that they should not rely on the typical measure of price-to-income ratio to evaluate the health of the housing market. They are literally saying that the bubble is worse than most experts are likely to appreciate, which is why they are issuing the warning. This is the Fed equivalent of yelling "FIRE" in a crowded theater. They would not spook the market like this unless they absolutely felt it was necessary because people are not appreciating the impending danger.

You say "I don't know how closely you follow the Fed".

I say "I don't know how closely you read what they wrote in this article".

You are saying the fed knows the future but some things are just dog whistles to the informed, so they don't really mean that part, they just have to put it there. Those of us that know the code ignore that part. That's what I call tinfoil hat thinking.

The fact is nobody knows what will happen until it does. But let's at least agree on what is in the article, which I copy and pasted.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:*hikes = homes....arghhhh sorry, this phone has horrible autocorrect

I’m reading on a little phone screen. Where does this article say 30% homes bought by investors? What is exact quote?

Where was the 30% quote?

Sorry, getting the articles I read this morning crossed, but the Fed writing was linked to by this article:

https://www.msn.com/en-us/money/markets/signs-of-a-housing-bubble-are-brewing/ar-AAVGLv1

Investors now buy 33% of the homes in the US, which is a 5% larger share than the average over the past decade, according to John Burns Real Estate Consulting. The business of ibuying -- in which a company buys a home for cash to slightly fix it up and resell it again -- is only 1.7% of the national housing market in the last quarter of 2021, according to Zillow. But in some cities, the share of homes going to ibuyers is as high as 11%.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:A lotta speculators, investors, people who bought at peak FOMO, and RE agents are in denial ITT. The Federal Reserve must be wrong when they use the B word. Prices on assets only ever go up, amirite?

Clickbait gets the clicks, amirite?

What specifically do you think is going to happen to “pop” this “bubble”?

Not the PP, but who knows. Could be anything. We won’t know until we know.

I’m more worried that we have an “all asset” bubble that will take stocks down too. The minor stock market correction earlier this year didn’t affect things much.

+1. Ever hear of credit default swaps before 2008? Because that is what really caused things to go nuclear. Yes, in 2007–8 there was an increase in foreclosures (FOMO ended in 2006, people couldn’t afford the crazy mortgages they took out at the same time prices were declining, and those people who couldn’t afford their payments also couldn’t sell for what they bought so they walked away), but it was the liquidity crisis caused by banks doing risky things with mortgage products that really caused the tailspin. That is what caused the 2008 crisis (Lehman and Bear Stearns going under, etc) that caused recession and job loss, which is what really caused the vast majority of foreclosures in 2008-12. Do you really think banks have stopped taking risks? And do you really think normal people stopped taking risks, too? Just look at all the crazy stuff investors are doing right now to get into real estate. Normal people quitting their jobs, taking out HELOCs and cash out refis on multiple houses, etc.

Right now we are already on the brink of a recession. For two years people have been FOMOing into houses they can’t afford. Prices are way out of line with incomes. Banks will loan you way more than you can afford (not everyone will be smart enough not to buy at the top of their preapproval, especially when OMG I have to buy now or less be priced out forever, homes only go up!).

In it just one poster who pollutes every real estate thread with constant references to FOMO, or have multiple people been infected with this idiocy? Regardless, it seems like this person/people are determined to believe that the only reason others are moving these days is some juvenile compulsion. I have no ides why she/they are so invested in this.

The Federal Reserve article itself literally cited “fear of missing out.”

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I don't know how closely you follow the Fed, but when they issue a statement like this it has been vetted by dozens of highly-trained economists. The Fed is incredibly careful not to be alarmist or to overstate economic conditions. The Fed is acutely aware that every single tiny signal that it sends out into the world will have enormous consequences in the market. This is because major market participants know (A) that the Fed knows what its talking about, and (B) the Fed also has the power to effect the market through its manipulation of interest rates. So if the Fed thinks there is a bubble, there is a bubble. If the Fed saysthat there is a bubble, there is a VERY BIG bubble. This is the kind of warning that could spook not only the housing market, but the entire economy. They would not issue this warning if there wasn't a desire reason to do so. And here is part of what they said:

"[The Fed] also found that the surge in disposable income due to pandemic-related fiscal and monetary stimulus, as well as reduced household consumption because of mobility restrictions, may have lessened its usefulness as a gauge -- suggesting that any bubble may be more advanced than those numbers suggest. "

What they are telling market participants is that they should not rely on the typical measure of price-to-income ratio to evaluate the health of the housing market. They are literally saying that the bubble is worse than most experts are likely to appreciate, which is why they are issuing the warning. This is the Fed equivalent of yelling "FIRE" in a crowded theater. They would not spook the market like this unless they absolutely felt it was necessary because people are not appreciating the impending danger.

You say "I don't know how closely you follow the Fed".

I say "I don't know how closely you read what they wrote in this article".

You are saying the fed knows the future but some things are just dog whistles to the informed, so they don't really mean that part, they just have to put it there. Those of us that know the code ignore that part. That's what I call tinfoil hat thinking.

The fact is nobody knows what will happen until it does. But let's at least agree on what is in the article, which I copy and pasted.

I am saying that Fed makes the future. And I'm saying that you don't seem to understand the Federal Reserve system or economics.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I don't know how closely you follow the Fed, but when they issue a statement like this it has been vetted by dozens of highly-trained economists. The Fed is incredibly careful not to be alarmist or to overstate economic conditions. The Fed is acutely aware that every single tiny signal that it sends out into the world will have enormous consequences in the market. This is because major market participants know (A) that the Fed knows what its talking about, and (B) the Fed also has the power to effect the market through its manipulation of interest rates. So if the Fed thinks there is a bubble, there is a bubble. If the Fed saysthat there is a bubble, there is a VERY BIG bubble. This is the kind of warning that could spook not only the housing market, but the entire economy. They would not issue this warning if there wasn't a desire reason to do so. And here is part of what they said:

"[The Fed] also found that the surge in disposable income due to pandemic-related fiscal and monetary stimulus, as well as reduced household consumption because of mobility restrictions, may have lessened its usefulness as a gauge -- suggesting that any bubble may be more advanced than those numbers suggest. "

What they are telling market participants is that they should not rely on the typical measure of price-to-income ratio to evaluate the health of the housing market. They are literally saying that the bubble is worse than most experts are likely to appreciate, which is why they are issuing the warning. This is the Fed equivalent of yelling "FIRE" in a crowded theater. They would not spook the market like this unless they absolutely felt it was necessary because people are not appreciating the impending danger.

You say "I don't know how closely you follow the Fed".

I say "I don't know how closely you read what they wrote in this article".

You are saying the fed knows the future but some things are just dog whistles to the informed, so they don't really mean that part, they just have to put it there. Those of us that know the code ignore that part. That's what I call tinfoil hat thinking.

The fact is nobody knows what will happen until it does. But let's at least agree on what is in the article, which I copy and pasted.

I am saying that Fed makes the future. And I'm saying that you don't seem to understand the Federal Reserve system or economics.

Now you are really not making sense. And the strawman + ad-hom doubles down.

So you are saying that the fed can decide if the housing market crashes or not? Since they “make the future”?

If that is true, why would they crash it?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I don't know how closely you follow the Fed, but when they issue a statement like this it has been vetted by dozens of highly-trained economists. The Fed is incredibly careful not to be alarmist or to overstate economic conditions. The Fed is acutely aware that every single tiny signal that it sends out into the world will have enormous consequences in the market. This is because major market participants know (A) that the Fed knows what its talking about, and (B) the Fed also has the power to effect the market through its manipulation of interest rates. So if the Fed thinks there is a bubble, there is a bubble. If the Fed saysthat there is a bubble, there is a VERY BIG bubble. This is the kind of warning that could spook not only the housing market, but the entire economy. They would not issue this warning if there wasn't a desire reason to do so. And here is part of what they said:

"[The Fed] also found that the surge in disposable income due to pandemic-related fiscal and monetary stimulus, as well as reduced household consumption because of mobility restrictions, may have lessened its usefulness as a gauge -- suggesting that any bubble may be more advanced than those numbers suggest. "

What they are telling market participants is that they should not rely on the typical measure of price-to-income ratio to evaluate the health of the housing market. They are literally saying that the bubble is worse than most experts are likely to appreciate, which is why they are issuing the warning. This is the Fed equivalent of yelling "FIRE" in a crowded theater. They would not spook the market like this unless they absolutely felt it was necessary because people are not appreciating the impending danger.

You say "I don't know how closely you follow the Fed".

I say "I don't know how closely you read what they wrote in this article".

You are saying the fed knows the future but some things are just dog whistles to the informed, so they don't really mean that part, they just have to put it there. Those of us that know the code ignore that part. That's what I call tinfoil hat thinking.

The fact is nobody knows what will happen until it does. But let's at least agree on what is in the article, which I copy and pasted.

I am saying that Fed makes the future. And I'm saying that you don't seem to understand the Federal Reserve system or economics.

Now you are really not making sense. And the strawman + ad-hom doubles down.

So you are saying that the fed can decide if the housing market crashes or not? Since they “make the future”?

If that is true, why would they crash it?

Look, I'm not here to make anyone feel bad. The information is here if you want to make use of it. Experts are telling us that there is a housing bubble, and I'm telling you that these experts are inclined to understate these issues, and also that by merely stating it, the Fed can make housing prices begin to decline. They may be worried about inflation in housing, as someone else suggested, but the most likely explanation is they are trying to stem the crest of price ascent because they already know that the bubble is eventually going to burst. In issuing this warning, they are trying to make the inevitable devaluation curve less severe and prevent an all out panic-driven crash.

My advice to you (and anyone) is to stop fighting the premise and instead protect your assets as best you can. Shore up any vulnerability that you can. If you own property as an investment, this is probably a great moment to sell, unless you can weather a serious downturn in valuation that could span a decade or more. If you own your house and you are not over-extended (ie you can afford your payments) you plan on staying for another 10 years or so, there's no urgency to do anything. If you are planning to buy or trying to buy, this is not the time. Give it another 6 months to a year and see how things look then. Renting is the right move financially at this juncture.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I don't know how closely you follow the Fed, but when they issue a statement like this it has been vetted by dozens of highly-trained economists. The Fed is incredibly careful not to be alarmist or to overstate economic conditions. The Fed is acutely aware that every single tiny signal that it sends out into the world will have enormous consequences in the market. This is because major market participants know (A) that the Fed knows what its talking about, and (B) the Fed also has the power to effect the market through its manipulation of interest rates. So if the Fed thinks there is a bubble, there is a bubble. If the Fed saysthat there is a bubble, there is a VERY BIG bubble. This is the kind of warning that could spook not only the housing market, but the entire economy. They would not issue this warning if there wasn't a desire reason to do so. And here is part of what they said:

"[The Fed] also found that the surge in disposable income due to pandemic-related fiscal and monetary stimulus, as well as reduced household consumption because of mobility restrictions, may have lessened its usefulness as a gauge -- suggesting that any bubble may be more advanced than those numbers suggest. "

What they are telling market participants is that they should not rely on the typical measure of price-to-income ratio to evaluate the health of the housing market. They are literally saying that the bubble is worse than most experts are likely to appreciate, which is why they are issuing the warning. This is the Fed equivalent of yelling "FIRE" in a crowded theater. They would not spook the market like this unless they absolutely felt it was necessary because people are not appreciating the impending danger.

You say "I don't know how closely you follow the Fed".

I say "I don't know how closely you read what they wrote in this article".

You are saying the fed knows the future but some things are just dog whistles to the informed, so they don't really mean that part, they just have to put it there. Those of us that know the code ignore that part. That's what I call tinfoil hat thinking.

The fact is nobody knows what will happen until it does. But let's at least agree on what is in the article, which I copy and pasted.

I am saying that Fed makes the future. And I'm saying that you don't seem to understand the Federal Reserve system or economics.

Now you are really not making sense. And the strawman + ad-hom doubles down.

So you are saying that the fed can decide if the housing market crashes or not? Since they “make the future”?

If that is true, why would they crash it?

They are trying to engineer a “soft landing.” Which apparently has only worked kinda once.

https://www.wsj.com/amp/articles/the-odds-dont-favor-the-feds-soft-landing-11648045029

https://abcnews.go.com/amp/US/wireStory/federal-reserve-begin-risky-pursuit-soft-landing-83436178

https://thehill.com/blogs/congress-blog/economy-budget/597710-no-the-fed-cannot-engineer-a-soft-landing-but-can-wreak?amp

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I don't know how closely you follow the Fed, but when they issue a statement like this it has been vetted by dozens of highly-trained economists. The Fed is incredibly careful not to be alarmist or to overstate economic conditions. The Fed is acutely aware that every single tiny signal that it sends out into the world will have enormous consequences in the market. This is because major market participants know (A) that the Fed knows what its talking about, and (B) the Fed also has the power to effect the market through its manipulation of interest rates. So if the Fed thinks there is a bubble, there is a bubble. If the Fed saysthat there is a bubble, there is a VERY BIG bubble. This is the kind of warning that could spook not only the housing market, but the entire economy. They would not issue this warning if there wasn't a desire reason to do so. And here is part of what they said:

"[The Fed] also found that the surge in disposable income due to pandemic-related fiscal and monetary stimulus, as well as reduced household consumption because of mobility restrictions, may have lessened its usefulness as a gauge -- suggesting that any bubble may be more advanced than those numbers suggest. "

What they are telling market participants is that they should not rely on the typical measure of price-to-income ratio to evaluate the health of the housing market. They are literally saying that the bubble is worse than most experts are likely to appreciate, which is why they are issuing the warning. This is the Fed equivalent of yelling "FIRE" in a crowded theater. They would not spook the market like this unless they absolutely felt it was necessary because people are not appreciating the impending danger.

You say "I don't know how closely you follow the Fed".

I say "I don't know how closely you read what they wrote in this article".

You are saying the fed knows the future but some things are just dog whistles to the informed, so they don't really mean that part, they just have to put it there. Those of us that know the code ignore that part. That's what I call tinfoil hat thinking.

The fact is nobody knows what will happen until it does. But let's at least agree on what is in the article, which I copy and pasted.

I am saying that Fed makes the future. And I'm saying that you don't seem to understand the Federal Reserve system or economics.

Now you are really not making sense. And the strawman + ad-hom doubles down.

So you are saying that the fed can decide if the housing market crashes or not? Since they “make the future”?

If that is true, why would they crash it?

Look, I'm not here to make anyone feel bad. The information is here if you want to make use of it. Experts are telling us that there is a housing bubble, and I'm telling you that these experts are inclined to understate these issues, and also that by merely stating it, the Fed can make housing prices begin to decline. They may be worried about inflation in housing, as someone else suggested, but the most likely explanation is they are trying to stem the crest of price ascent because they already know that the bubble is eventually going to burst. In issuing this warning, they are trying to make the inevitable devaluation curve less severe and prevent an all out panic-driven crash.

My advice to you (and anyone) is to stop fighting the premise and instead protect your assets as best you can. Shore up any vulnerability that you can. If you own property as an investment, this is probably a great moment to sell, unless you can weather a serious downturn in valuation that could span a decade or more. If you own your house and you are not over-extended (ie you can afford your payments) you plan on staying for another 10 years or so, there's no urgency to do anything. If you are planning to buy or trying to buy, this is not the time. Give it another 6 months to a year and see how things look then. Renting is the right move financially at this juncture.

+1. “DON’T FIGHT THE FED.”

They got us into this pickle and they will do what they think it takes to get us out.