Housing is also in a bubble due to the Fed’s zero rates, withheld inventory, government modification programs, and an unprecedented uptick in all-cash investors. Clearly, there’s never been a market more manipulated than housing. It’s a joke.
The surge of Wall Street liquidity has spilled over into housing distorting prices and reducing the number of first time home buyers to an all-time low. The home ownership rate is actually falling even while prices climb higher, which is just one of many anomalies created by the Fed’s policy. (Who’s ever heard of a housing boom, where the number of first time home buyers is dropping?)
Also, the Central Bank has purchased more than $1 trillion in mortgage-backed securities (MBS) via QE, which begs the question: How can housing prices NOT be in a bubble?
As we noted earlier, the Fed understands the impact its policies have had. They know the markets are overheated and they’re determined to do something about it. A recent article in Bloomberg explains the Fed’s plan for winding down QE “without doing damage to the economy”.
Read entire article: http://www.counterpunch.org/2014/02/03/prelude-to-a-crash/
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