Inflating Another Housing Bubble
Under Hope & Change, even good news is ominous:
Over the past year, the Federal Reserve has ramped up its policy of quantitative easing, with the result being new stock market highs and surging bond prices. Moreover, housing prices jumped 8%, the biggest annual gain since 2006.
The result is that more than a trillion dollars have been added to the market value of single-family homes.
Unfortunately that $1 trillion exists only on paper. No new wealth has been created.
It appears that home prices are being levitated by quantitative easing. Because interest rates were .625% and .90% lower on new and existing homes respectively this year compared with last year, the monthly finance cost to purchase a new home remained the same and went up only 3% for an existing home.
While a housing recovery of sorts has developed, it is by no means a normal one. The government continues to go to extraordinary lengths to prop up sales by guaranteeing nearly 90% of new mortgage debt, financing half of all home purchase mortgages to buyers with zero equity at closing, driving mortgage interest rates to the lowest level in 100 years, and turning the Fed into the world’s largest buyer of new mortgage debt.
Thus, with real incomes essentially stagnant, this is a market recovery largely driven by low interest rates and plentiful government financing. This is eerily familiar to the previous government policy-induced boom that went bust in 2006, and from which the country is still struggling to recover.
Once interest rates are allowed to rise to natural levels, the bubble pops.
Meanwhile, the Regime is doubling down on the disastrous policy of forcing banks to make race-based mortgage loans to people unlikely to keep up their payments.
It’s almost as if they want another collapse. If the last one allowed them to elect a left-wing radical and push through the Dodd-Frank power grab, what might statists achieve by not letting the next crisis go to waste?
Enjoy the “recovery” while you can. It wasn’t built to last.
On a tip from Varla. Cross-posted at Moonbattery.