Are Rising Home Prices a Good Thing?Submitted by Smaulgld.com on Wed, 07/31/2013 - 07:59
The Dark Side of Rising Home Prices
“I guess I don’t buy your premise, its a pretty unlikely possibility, we have never had a decline in housing prices on a nationwide basis ” Ben Bernanke July 2005 responding to a question that housing prices might come down.
Bernanke was correct in saying at the time* that there had never been a decline in housing prices on a nationwide basis. What he was oblivious to was that home prices were rising nationwide faster then they ever had because his predecessor Federal Reserve Chairman Alan Greenspan had brought the Fed Funds rate down to 1%. By mid 2007 the housing market party was over and prices began a four year nationwide decline.
Fast forward to 2013: Mr. Bernanke has learned that you can reheat an economic souffle. We are in the midst of another housing bubblet driven by Ben Bernanke’s Fed Funds Rate at 0% and massive doses of quantitative easing (QE) that involves the Fed buying $85 billion a month worth of mortgage backed securities and U.S. Treasury Securities.
The Dark Side
While the Fed and others cheer on the rise in housing (and stock market) prices as good for homeowners and the economy, there is a dark side to rising home prices.
Rising Home Prices: http://smaulgld.com/the-dark-side-of-rising-home-prices/