Posted on 06/28/2021 4:30:54 AM PDT by millenial4freedom
so glad someone from the Fed acknowledges this...it just would have been nice if they thought about this before they pursued their hyper-QE policies...but what do I know, I'm just one of the plebians.
(Excerpt) Read more at ft.com ...
Bailouts to come early next year?
Illegal immigrants have made demand for housing hyper-cyclical. The ability to postpone “moving out” has always made housing CONSTRUCTION somewhat cyclical, but the population of America itself now responds to economic cycles.
Home equity is where most of this country’s private personal wealth is. Boom and bust anywhere in the economy is harmful.
The US government is stuck, painted into a corner by debt. They can’t raise interest rates without creating a financial shock. All they have left is to blow a continous series of bubbles until the ultimate financial collapse and Greatest Depression.
They are out of bullets. They are out of control. They are just along for the ride like the rest of us. They can’t get the horses to stop the runaway stagecoach, so they keep employing the whip.
At least he recognized that the current housing boom is going to bust. A lot of people think “it is different this time”. They have learned nothing from 2008. Nothing.
No excerpt? I need to register to read anything?
Wish I could read it.
The US government is stuck, painted into a corner by debt. They can’t raise interest rates without creating a financial shock. All they have left is to blow a continous series of bubbles until the ultimate financial collapse and Greatest Depression.
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“Free money” printing by the Fed is analogous to someone taking oxycodone for pain. Initially it works, but then an ever increasing amount is required to produce the same effect. Then disaster.
Apologies, all. Here is an excerpt of the article:
James Politi in Washington and Colby Smith in New York
A senior Federal Reserve official has warned the US cannot afford a “boom and bust cycle” in the housing market that would threaten financial stability, in a sign of growing concern over rising property prices at the central bank.
“It’s very important for us to get back to our 2 per cent inflation target but the goal is for that to be sustainable,” Eric Rosengren, the president of the Boston Fed, told the Financial Times. “And for that to be sustainable, we can’t have a boom and bust cycle in something like real estate.
“I’m not predicting that we’ll necessarily have a bust. But I do think it’s worth paying close attention to what’s happening in the housing market,” he said.
According to data released by the National Association of Realtors last week, the median price for sales of existing homes was up 23.6 per cent year-on-year in May, topping $350,000 for the first time.
Rosengren said that in the Boston property market, it had become common for cash-only buyers to prevail in bidding contests, and that some have been declining home inspections to gain an edge with sellers.
“You don’t want too much exuberance in the housing market,” Rosengren said. “I would just highlight that boom and bust cycles in the real estate market have occurred in the United States multiple times, and around the world, and frequently as a source of financial stability concerns.”
He said the roaring housing market should be a factor as the central bank considers slowing or removing some of the hefty monetary support for the economy introduced during the coronavirus pandemic.
The Fed has been purchasing $40bn in agency mortgage-backed securities per month alongside $80bn in monthly Treasury debt as part of its asset purchase programme.
Fed officials are now beginning to discuss trimming that bond buying. And Rosengren said that “when it is appropriate” to begin that process, mortgage-backed securities purchases should be reduced at the same rate as Treasury purchases. That would mean the direct support to housing finance would wind down more quickly.
“That would imply that we would stop purchasing MBS well before we stopped purchasing Treasury securities,” he said.
James Bullard, president of the St Louis Fed, is among those who have called for the Fed to re-evaluate its support for the housing market against the backdrop of what he noted were broader concerns about a nascent bubble.
Robert Kaplan, Dallas Fed president, has also advocated for the purchases to end “sooner rather than later”, especially given mounting evidence of financial speculation in the housing market.
The Fed has said that it would begin reducing its asset purchases only once it had made “substantial further progress” towards its goals of 2 per cent average inflation and full employment.
Given the rapid recovery, Rosengren said “the conditions for thinking about whether we’ve attained substantial further progress will probably be met before the beginning of next year”.
The latest economic projections by the Fed showed central bank officials increasing interest rates from their current rock-bottom level in 2023, earlier than previously forecast. They also exposed a greater divide within the Federal Open Market Committee on the expected path of monetary policy than had been the case.
“There’s a great deal of uncertainty in the forecast,” Rosengren said. “Some people are going to have very rapid growth [and] the conditions for tightening policy may be happening sooner. And other people are going to think that the recovery is going to be a little slower.”
And no, we can’t have another major financial crisis. This smoke and mirrors financial management can not continue.
Do a search with the title and alternate sites that are not blocked emerge.
I swear either this administration is stupid or this is the plan to drive this country into the ground. And the dumb and dumber don’t even realize it.
That sounded kind of strange until I realized that there must be hundreds of thousands of small USA investors who purchase homes, then rent them for just enough money to cover the mortgage, insurance, and taxes.
I will speculate that many of the homes that BlackRock buys are many months behind in rent payments, and the current owners have no choice except to sell out at a deep discount.
This “administration” may be crazy but not stoopid.
Current demand is backed by people moving from CA/NY into TX and FL. I dont see this as a speculation bubble as we saw in 2008, but a simple supply and demand problem.
US cannot afford housing market ‘boom and bust’, warns Fed official
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Oh yes it can. History has proven the US can afford anything with its ability to print as much money as it wants...time and time and time again.
While I agree a supply/demand issue is definitely at play here, low interest rates are most definitely fueling this madness. Plus, this doesn’t seem to be limited to certain geographical places.
Here in liberal Massachusetts, home of the beloved Fake Indian house-flipping Law Professor, homes in the suburbs routinely sell at 5-20% over asking price. I think the contrast in the real estate market is more prominent when you look at cities vs. suburbs.
“...cities vs. suburbs.”
I agree. I live in FL, on the Gulf coast, and if you can find a single-family home in my area you are lucky and you will pay double the price of its worth.
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