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

Forum Index » Real Estate

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

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous]You think Jerome Powell has the nerve to shake up the housing market? No way. He was supposed to be a hardcore right wing rates guy but dropped to zero so fast it made your head spin. Then a few tweets from Trump and he didn’t touch rates for two years. He will raise twice to three times and that’s it. [/quote]

He’s not going to do it on purpose. Trump wasn’t facing double-digit inflation, and the opposite is happening here. Biden is screaming at Powell to get inflation under control before the mid-term elections. The concern is that we’re already in the situation we were in in the early 80’s, when the Fed waited so long to act, that by the time Volcker did what he had to do, the cure was very painful.

Interest rates alone aren’t what is worrying. The amount of QE the Fed has to unwind is unprecedented. This is an oversimplification, but the problem is that the Fed has been buying up to $120 billion worth of Mortgage backed securities and Treasuries a month for years. That was $$ off the books of the banks, which allowed them to loan more $$.  In May, they’re going to start letting $95 billion worth of those roll off as they mature. It’s not clear that they’ll meet that target, nor that simply letting the bonds roll off will do the trick. They may have to actively sell bonds, and no one has any idea what impact that will have on the loan market, other than not good. Banks will buy those bonds, but that will entail using cash that then won’t be available to loan out as mortgages.

Here’s the doomer perspective, which I don’t necessarily subscribe to, but it’s not outside the realm of possibility:

https://seekingalpha.com/article/4488903-another-housing-bubble-fed-holding-pin[/quote]

well that's terrifiying[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics