Posted on 05/20/2022 5:24:26 AM PDT by Browns Ultra Fan
Inflation Fightin’ Fed?
Kansas City Fed President Esther George said The Fed isn’t focused on impact of rates on stocks (or pension funds, apparently).
The inflation that is crushing Americans is due to energy and food price increases. That is, the non-core inflation. Under Biden, food is up 63%, gasoline is up 92% and diesel prices are up 112%. But The Fed doesn’t consider food and energy prices, per se.
If we look at the Taylor Rule considering fighting inflation including food and energy, The Fed would have to raise their target rate to … 21.38%.
Now, The Fed can clearly cool-off the housing market by raising rates. In fact, my fear is that they go too far and crash the housing market. The Fed will NEVER get to 20% again like we last saw under Volcker in 1981. 20% rates certainly cooled home prices back then and Fed rate hikes helped crash the housing market in 2008.
So, when The Fed says they want to be the inflation-fightin’ Fed, we must be aware what The Fed can and cannot do. They can’t tame the inflation beast in the form of food and energy prices (unless they crash the economy), but they can crush home prices.
(Excerpt) Read more at confoundedinterest.net ...
Forty years ago today, U.S. mortgage rates hit 18.5%.
Every accusation is a confession.
Factually incorrect. What crashed the housing market was bad paper; unqualified people in mortgages that then got bundled and sold to this firm or that investor.
“Forty years ago today, U.S. mortgage rates hit 18.5%.”
Forty years ago the feds were paying interest on a $1T national debt. What’s the interest payment on the 30+ trillion debt at rates that are actually curbing inflation?
I bought a new house with an interest rate mortgage of 13%.
Yes, those of us who were around remember the Carter disaster well. However, you can't convince the woke crowd that it's coming again, and will likely be much worse this time around.
Housing market needs to crash
Absolutely, Some folks were not required to show a W2 or any sort of proof that they even had a job.. Or, so I've been told..
That way, CDs can yield 5% with the bankers getting 2%.
A lot of retirees counted on pulling their money out of stocks, buying CDs and living off the interest.
Since they can't, they are hanging onto as much of their money as they can and slowly spending the principal.
If they could get 5%, a LOT of money would start flowing that is now being held.
Dodd/Frank and Bush policies led eventually to the crash.
Several factors combined led to the boom and eventual crash.
Giving no doc and no money down loans was a huge part.
However, the biggest real estate booms and busts happened in the states like FL, AZ, CA where people had absolutely no recourse against them if they decided to back out of the loan. Just drop the keys off at the bank and walk away. Unlike other states where that bad paper can be sold to a collection agency and they WILL come after you for the loss. Forcing you to either pay or declare bankruptcy.
Yes, in many states there were no documentation loans. No money down even. This led to many incidences of fraud.
The idea was to increase the percentage of home ownership in the country.
This caused price inflation in many areas. In places like AZ in 2002 people were literally camping out to be the first person to buy a house going on sale this coming weekend in a subdivision. It led to speculation. People buying multiple houses and selling them six months to one year later.
Eventually, the house of cards collapsed.
Exactly right. People lied and the economy died.
When Bill and Enola...who’ve been living out of their car for the last year and sleeping in Wal-Mart parking lots...can get a 100% loan on a $500K house...you know something’s bad wrong.
And then there were the homeowners treating their newfound home equity as an ATM (because of the rapidly rising market)...buying cars, boats and second homes. Then the rug was yanked out from under the housing market and boom, all of the nouveau riche are now nouveau bankrupt.
“They can’t tame the inflation beast in the form of food and energy prices (unless they crash the economy)...”
Complete and total Bullcrap. Those would instantly drop by unleashing the energy sector (and suspending all State and Federal taxes on fuel and energy) and removing all subsidies for NOT growing crops.
My wife and I bought our first home in the fall of 1979 with a 11.25% 30 year mortgage and considered ourselves very lucky we got in just before the 18% rates.
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