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

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]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.[/quote]

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

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:

[b]"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."[/b][/quote]

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 [b][u]says[/u][/b]that 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. [/quote]

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.[/quote]

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