Aug182015
Federal reserve underestimates sensitivity of housing to mortgage rates
The federal reserve couldn’t have prevented the housing bubble and bust through interest-rate policy alone.
In response to the housing bubble and bust, Congress passed the Dodd-Frank financial reform. These new mortgage regulations will prevent future housing bubbles by effectively banning destabilizing loan products with interest-only and negative amortization features used to inflate previous bubbles. Those loan programs enabled buyers to greatly inflate house prices from stable levels set by wages and mortgage rates.
Despite the groundbreaking change to real estate markets caused by this recent legislation, most housing market analysts and real estate economists fail to recognize the impact of these changes on the market, and they continue to make predictions based on previous history and their previous understanding of how housing markets work.
The toxic loan products banned by Dodd-Frank were invented to solve the problem of affordability. In a stable housing market, the equilibrium price is the highest price consumers can finance, so under pressure to complete more deals, lenders seek ways to increase the size of the loans lenders provide borrowers. Unstable affordability products were born out of this constant market pressure.
Since affordability products were designed and used to solve affordability problems, when interest rates would spike higher, lenders had a way to close deals and sustain sales momentum. After Dodd-Frank, this was no longer the case. In February 2013, before the taper tantrum of May 2013, I wrote that Future housing markets will be very interest rate sensitive due to the lack of affordability products. This was dramatically confirmed when rising rates abruptly ended the reflation rally.
Even though the evidence of housing market’s extreme sensitivity to mortgage interest rates is convincing, the real estate economists at the federal reserve still haven’t figured this out. They don’t foresee the upcoming problems rising mortgage rates will bring, and they don’t see how past changes would have mattered.
Further, in the federal reserve’s desire to absolve themselves of responsibility for the housing bubble, they applied their faulty understanding to the housing bubble and determined they would have needed to raise interest rates to 8%, ruining the whole economy to prevent the bubble back in 2004.
Interest Rates and House Prices: Pill or Poison?
Òscar Jordà, Moritz Schularick, and Alan M. Taylor, August 3, 2015
Wild swings in asset prices over the past 20 years and the associated boom-bust cycles have sparked considerable debate about how monetary policy might play a stabilizing role…. Some policymakers, such as then-governor of the Federal Reserve Ben Bernanke (2002), argued that interest rate policy should focus exclusively on achieving the Fed’s dual mandate of stable prices and maximum employment. That is, threats to the stability of the financial system should be dealt with separately through financial regulation and supervision. More recently in the aftermath of the Great Recession, another former governor, Jeremy Stein (2014), argued for using interest rate policy to reduce financial market vulnerability and as a complement to regulation and supervision. Such an approach entails a tradeoff: Raising interest rates to curb financial risk could mean deviating from the dual mandate, therefore entertaining higher unemployment and lower inflation.
This interest-rate dilemma is a false dichotomy. The authors believe low interest rates in 2004 was necessary to revive the economy, which is probably true, and they believe the interest rate policy that revived the economy also caused house prices to destabilize and become a bubble — which is not true.
The low mortgage rates of 2004 and 2005 were not the cause of the housing bubble. The low rates temporarily increased affordability, and these rates may have served as a precipitating factor to get the rally started, but mortgage rates only account for 10% to 15% of the huge runnup in house prices that was the Great Housing Bubble. The bulk of price inflation, 85% of the massive increase in price, was caused by toxic mortgage products like the option ARM that allowed borrowers to obtain loan balances eight to ten times annual income.
The real failure of the federal reserve — and there was a huge failure at the federal reserve — but the real failure was one of regulation and oversight. The federal reserve allowed the option ARM and other toxic mortgage products, and they allowed unrestricted credit default swaps on mortgage pools stuffed with toxic option ARMs. Investors pumped hundreds of billions of dollars into collateralized debt obligations insured by credit default swaps the ultimately found its way into millions of Option ARM mortgages at eight to ten times a borrower’s income. This greatly inflated house prices and set up an entire generation with debts too-big-to-manage and banks too-big-to-fail.
This Economic Letter investigates the link between interest rates, mortgage lending, and house prices. Quantifying this link is important in assessing whether or not interest rate policy can be used to guard against leveraged asset price booms in practice. Housing plays perhaps the most important role among asset classes because purchases are typically leveraged through mortgages. Many consider the 2002–06 housing bubble an important trigger of the subsequent financial crisis. However, economists disagree about the role that low interest rates played in fueling the house price boom.
As I noted above, mortgage rates were only a small factor contributing to the housing bubble. Lowering the rates in 2004 may have got the party started, but once set in motion, the problems with lax oversight allowed the entire housing market to destabilize.
Our goal in this Letter is different. We instead ask how much interest rates would have had to rise to keep housing prices under control. Our rough figures suggest interest rates would have needed to rise around 8 percentage points to completely avoid the boom-bust cycle. However, such a boost also could have caused significant damage to the Fed’s main objectives of full employment and price stability. …
Since low mortgage rates only account for 10% to 15% of the price increase during the housing bubble, it isn’t surprising that the math shows 8% mortgage rates would have been necessary to erase the other 85% to 90% of the price inflation. 
In the real world, the interest rate rise wouldn’t have needed to be so large.
First, any rise in rates would have removed the price momentum so many were intent on capturing. If prices hadn’t been rising so rapidly, people wouldn’t have been motivated to participate, so much of the impetus to buy would have evaporated.
Second, rising interest rates would have provided investors with other, superior investment alternatives. One of the main reasons money flowed into mortgage-backed securities that were package into CDOs is because this money had nowhere else to go. In a higher interest-rate environment, this money would not have flowed into housing in a way that inflated house prices.
Third, any increase in interest rates would have weakened the economy, which also would have reduced housing demand.
The 8% number the economists calculated takes into account none of these three factors. But when you really think about this study’s purpose and context, the real purpose was to generate the largest number possible to underscore the hopelessness of this approach. They didn’t want to look back and discover a better path; they want to look back and believe all their decisions are both justifiable and correct.
Several complex factors caused the Great Recession. This Letter focuses on a particular mechanism. Our experiment based on the trilemma of international finance indicates that using interest rate policy to bring down housing prices would have required a severe tightening in 2002. There are several caveats to this result. First, the initial federal funds rate increase indicated by our analysis could have been smaller. For instance, preventing a financial crisis might not have required bringing house prices all the way back to trend. Second, households might have eventually revised their expectations about the Fed’s new resolve against asset price booms, thus requiring a smaller initial intervention. Third, even a fraction of our projected 8 percentage point increase would have been sufficient to sink the economy into recession, which would have also slowed house prices more rapidly than we calculated, albeit at a cost of added unemployment. Finally, one has to factor in the inevitable uncertainty that surrounds any empirical analysis.
What is the takeaway then? Slowing down a boom in house prices is likely to require a considerable increase in interest rates, probably by an amount that would be widely at odds with the dual mandate of full employment and price stability. Moreover, the Fed would need a crystal ball to foretell house price booms. In restraining asset prices, while the power of interest rate policy is uncontestable, its wisdom is debatable.
Back in May I asked Can the federal reserve identify and prevent financial bubbles? Given that economists failed to see one of the largest, most obvious, and most destructive financial bubbles in modern history, what reason do we have to believe they can spot any financial bubble?
I have my doubts federal reserve economists will agree on the right course of action even if they can agree on a bubble. Some economists will vehemently disagree with their colleagues. Many economists get caught up in their own confirmation biases and interpret incoming data through the filter of what they want to see happen. Reaching a consensus will be difficult. Just look at the problems the Canadians, Chinese, and Australians have admitting to their housing bubbles.
With the realities of identifying and then agreeing on a course of action being so problematic, for as much as I like the idea of stamping out housing bubbles before they blow up, unless we get much better at identifying them and crafting policies to deal with them, we must focus on solutions to cleaning up the mess after the fact.
Unfortunately, while a financial bubble inflates, everyone involves makes a great deal of money, and huge profits have a way of blinding and paralyzing even the most intelligent and vigilant regulators.
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We’re over-due for some mockery of the Left and its Save the World policies!
A family in public housing makes $498,000 a year. And HUD wants tenants like this to stay.
http://www.washingtonpost.com/blogs/federal-eye/wp/2015/08/17/a-family-in-public-housing-makes-nearly-498000-a-year-and-hud-wants-tenants-like-this-to-stay/
When I read this, my first thought was that HUD would want to keep people in these units even after they’ve risen above the income thresholds to prevent these from becoming slum tenements. Most people would chose to leave if they made more money, so any that chose to stay raises the success profile of the typical resident, hopefully leading to a better community.
The specific examples of people who have means far beyond what would qualify to enter the system shows they have a problem, but the solution is not that complex.
The final sentence of the report summed it up best:
This seems like an ideal plan for someone just finishing grad school who’s dirt poor. Apply, get in, and stay for a few years at least, while you clean-up debt and build savings.
There are a lot of public housing complexes in the city I live in, San Francisco. I wouldn’t want to live in any of them even for free. The vast majority of violent crime in the city occurs in and near the public housing (for various reasons).
No thanks.
My question is why do these people making crazy money WANT to live in the projects? My guess is that this family making $500k doesn’t actually live in the unit but illegally sublets it to family or friends. It’s common here for someone to stay in their “grandma’s” rent-controlled apartment while grandma is in the nursing home. As long as the landlord doesn’t find out…
Multi-generational rental subsidies? Nice.
This is exactly why HUD doesn’t kick these people out. They hope these people will raise the quality of people living in the neighborhood.
I disagree with the watchdog’s characterization that this is egregious abuse. These people are simply benefiting from the system as its currently designed. They aren’t abusing anything because the rules of the program don’t require testing incomes on a yearly basis.
If HUD wanted to fix the program, they could simply test incomes on a yearly basis and charge those making high incomes the current market rate for those apartment instead of the subsidized rate. If the families want to continue living there, then nobody is being displaced, and the taxpayers aren’t paying for it. Seems simple to me, but that’s why I work in the private sector.
There’s a long wait list, so low income people are being displaced.
If the subsidies are withheld, then it should be possible to divert those funds to those that need them. Either use the funds to buy more buildings, or subsidize the rent in privately owned buildings, a la Section 8. Maybe that’s not as ideal as evicting a family in your book, but it seems to be the least disruptive to all involved. If you negatively incentivize people with the fear of eviction, it will make them think twice about trying to better their situation for fear of being booted from their home.
Negative incentives permeate every area of public policy, especially tax policy.
Unfortunately, viewing housing in the long-term (as if it had any relevance in a world now being driven/dominated by financial churn, vested interests, rule bending/rule breaking, accounting fraud, greed and speculation) @ zero bound will only aggravate the level of future losses.
Haven’t you heard? “Everyone is feeling good about housing.”
Everyone wants to buy and more
Social media master and Bloomberg TV co-host Joe Weisenthal gives a quick rundown on everything going right in housing at this moment.
His “What’d YOU miss?” report give us homeowner sentiment, and homebuilder confidence in one chart as proof that real estate is off-the-chart hot right now.
“Everyone is feeling good about housing,” Weisenthal says, “there a lot of different data points here but they are all going in the right direction.”
“Pretty much anyway you spolice people are feeling good about housing,” he states later in the video.
“It’s back,” he concludes.
Thanks for the great news, Joe.
Jim Cramer is vocal and bullish on housing related stocks, mainly due to household formation creating demand with restricted supply.
I know two different Gen X couples that bought for the first time recently, so there may be some household formation coming from those that sat out the housing bubble and resulting instability of the crash, that are just now entering the market. The media loves to focus on Millennials (their target demographic for consumer ads) but there is more to the story with first time buying.
I’m planning to write about the new entry-level / first-time buying market.
In the past, this market was largely made up of young couples and new families. After the first house, transactions were move-ups. This concentrates buying in a somewhat narrow age range, which is why so many reports focus on Millennials right now. However, due to the housing bubble and bust, the last decade saw no net equity gains and millions of foreclosures, to as generation X buys, they will be entry-level buyers. This puts two generations in competition for the same stock of homes, and it puts a dent in the move-up market until they all have equity. It’s difficult to foresee the implications of this on house prices and sales, but it will have an impact.
Builder Confidence Reaches Highest Level Since 2005
Progress among the single-family housing market is moving at a slow but sure pace. According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder sentiment in the market for newly built, single-family homes in August rose one point to a level of 61, the highest reading since November 2005.
“The fact the builder confidence has been in the low 60s for three straight months shows that single-family housing is making slow but steady progress,” said Tom Woods, NAHB chairman and a home builder from Blue Springs, Missouri. “However, we continue to hear that builders face difficulties accessing land and labor.”
“Even with the slow rise in confidence, builders continue to face difficulty obtaining lots to build on and labor to build the homes,” said David Crowe, NAHB chief economist. “Prices are rising for both inputs putting some profit squeeze on builders and making it more difficult to build affordable homes for first time buyers. While existing home prices have risen, they have not risen enough to compensate builders for the added supply costs, particularly land. While actual sales prices of new homes have been rising because of the compositional shift, quality constant new home prices have risen less than quality controlled existing home prices. This trend is likely to shift to higher new home prices in order to induce more builders to build.”
Americans Spend a Much Higher Percentage of Income on Housing than Years Past
First-time homebuyers in the market today are waiting longer periods of time to purchase a home and are less likely to be married compared to first-time buyers in the 1970s and 1980s, according to a Zillow analysis released Monday.
The Zillow study found that Americans are renting for an average of six years before buying their first homes. Meanwhile, in the 1970s, they rented for an average of 2.6 years. In addition, 52 percent of first-time homebuyers were married in the late 1980s, while today, only 40 percent are married.
Zillow also reported that Americans are putting much more of their incomes toward purchasing a home in today’s market.
In the 1970s, first-time homebuyers bought homes that cost about 1.7 times their annual income, now they are buying homes that cost 2.6 times their annual income.
“Millennials are delaying all kinds of major life decisions, like getting married and having kids, so it makes sense that they would also delay buying a home,” Gudell said. “We know millennials value home-ownership and want to buy. The next challenge will be figuring out how they can save for a down payment and qualify for a mortgage, especially while the rental market is so unaffordable all over the country. The last hurdle will be finding a home they like amidst very tight inventory, especially among starter homes.”
“In the 1970s, first-time homebuyers bought homes that cost about 1.7 times their annual income, now they are buying homes that cost 2.6 times their annual income.”
In the 1970s, rates were twice what they are now. There is a strong correlation between low rates and higher income multiples (like, 1:1). When rates are lower, prices are higher relative to incomes. This means that down payments are also higher relative to incomes – thus the longer time to save. Congratulations, Zillow (sort of) understands math.
Everything else in the article is just filler. Since more first time buyers are able to buy without being married, does that mean that homes are more affordable now than the late 80s? (bubble in CA in late 80s, so yes).
Some Lawmakers Believe ‘Too Big to Fail’ Is Still Alive Seven Years After the Crisis
Two years ago, U.S. Senators Sherrod Brown (D-Ohio) and David Vitter (R-Louisiana) introduced a bipartisan bill in an attempt to end taxpayer bailouts. In May 2015, Vitter and Senator Elizabeth Warren (D-Massachusetts) authored similar bipartisan legislation, the Bailout Prevention Act, aimed at ending “Too Big to Fail.”
Three weeks after the Vitter-Warren bill was introduced in the Senate, Reps. Scott Garrett (R-New Jersey) and Mike Capuano (D-Massachusetts) introduced a similar bill in the House that would limit the Fed’s ability to bail out big banks in times of a crisis.
Some lawmakers are skeptical that Too Big to Fail has ended seven years after the crisis despite claims from some high-level government officials such as Treasury Secretary Jacob Lew that it has ended. The Government Accountability Office (GAO) released the results of a comprehensive study in July 2014 indicating that the larger national banks have not only received assistance from government bailout programs, but they enjoy a taxpayer backstop that community and regional banks do not, and that advantage widens during an economic crisis. The report was requested by Vitter and Brown two years earlier.
“(The GAO report) confirms that in times of crisis, the largest megabanks receive an advantage over Main Street financial institutions,” Vitter and Brown said in a joint statement. “Wall Street lobbyists may try to spin that the advantage has lessened. But if the Army Corps of Engineers came out with study that said a levee system works pretty well when it’s sunny – but couldn’t be trusted in a hurricane – we would take that as evidence we need to act. We can fix Too Big to Fail by passing our bipartisan legislation which would ensure that Wall Street megabanks – instead of taxpayers – have adequate capital to cover their losses in a crisis.”
“To keep taxpayers from ever having to step in to save a financial firm again, Wall Street Reform ended ‘too big to fail’ as a matter of law,” Lew told the audience at the Brookings Institution. “In addition, regulators now have modern, commonsense tools to protect taxpayers. For example, the FSOC can designate large institutions as ‘systematically important’ and hold them to higher standards. Also, in the event of a crisis or a bankruptcy, regulators can seize large financial institutions and wind them down in an orderly way.”
In July 2015, the House Financial Services Financial Institutions and Consumer Credit Subcommittee held a hearing to discuss the criteria for designating a company as a SIFI, criticizing the $50 billion asset threshold required by Dodd-Frank. Some members of that Subcommittee said in the hearing they believe that Dodd-Frank is codifying Too Big to Fail by continuing to designate companies as SIFIs. Also in July, the Senate Subcommittee on Financial Institutions and Consumer Protection held a hearing, to discuss strategies that would end to end Too Big to Fail.
“It’s no secret that too big to fail is still around. If another financial crisis happened tomorrow–and that’s still a real risk–nobody doubts that megabanks would be calling on the federal government to bail them out again,” Vitter said in May when the Bailout Prevention Act was introduced. “Our legislation makes common sense reforms to the Fed’s emergency lending powers to protect taxpayers the next time the megabanks lead us into another crisis.”
Truth in Politics
http://www.ritholtz.com/blog/wp-content/uploads/2015/08/truth.jpg
U.S. Lacks Ammo for Next Economic Crisis
Policy makers worry fiscal and monetary tools to battle a recession are in short supply
As the U.S. economic expansion ages and clouds gather overseas, policy makers worry about recession. Their concern isn’t that a downturn is imminent but whether they will have firepower to fight back when one does arrive.
Money has been Washington’s primary weapon in the decades since British economist John Maynard Keynes proposed aggressive government spending to battle the Great Depression. The U.S. generally injects cash into the economy through interest-rate cuts, tax cuts or ramped-up federal spending.
Those tools could be hard to employ when the next dip comes: Interest rates are near zero, and fiscal stimulus plans could be hampered by high levels of government debt and the prospect of growing budget deficits to cover entitlement spending on retired baby boomers.
Looming threats are a reminder that the slow-growing global economy is just a shock away from peril. Japan’s economy contracted in the second quarter and Europe recorded lackluster growth. China’s slowdown, meanwhile, appears more severe than global policy makers initially realized and a currency devaluation there might spur trade frictions.
With the U.S. expansion entering its seventh year, policy makers are planning how to respond to the next downturn, which history shows is inevitable. The current expansion is now 16 months longer than the average since World War II, and none has lasted longer than a decade.
“The world economy is like an ocean liner without lifeboats,” economists at HSBC Bank wrote in a recent research note.
In the next downturn, former Fed Chairman Ben Bernanke said in an interview, the tools of government will be “more limited than usual…”
I’ve thought a lot about this the last couple of years and I’m thinking this alone is a decent argument to try to get the interest rates up bit by bit.
We’re definitely caught in a Japan-style trap (it was obvious we were going in that direction in 2008).
Maybe the best way to prepare for the next downturn is to raise rates and lower spending while we can. And actually pay down a bit of debt instead of using it all in $400 checks to taxpayers.
The relative success of QE may convince the federal reserve otherwise. If the no longer fear the zero bound because they know they can print money, it’s moral hazard that takes away from the angst associated with creating too much debt leading to deflation.
Governments need to practice austerity in good times and spend more freely in bad times.
In practice almost all governments do the opposite.
Yep. The Left is completely disingenuous when they complain about austerity in recessions and tout Keynes. They have absolutely no intent to implement lower spending levels in good times. The Right denies basic economics, math and science in both good times and bad.
The Right has no intention of lowering spending during good times either.
The Left denies science whenever they talk about abortion. A heartbeat at 5 weeks and the ability to feel pain = human life. An inconvenient truth.
People in government at all levels generally don’t understand economics and math.
I’ve always wondered about liberals that think it’s morally wrong to torture our enemies, but it’s morally right to kill our own children. I’m no psychologist, but what kind of split personality is required for that to make sense, without going crazy?
It’s also wrong to eat meat, but it’s ok to butcher an innocent head of lettuce, that did nothing whatsoever to deserve it. If I were them, I would refuse to eat anything. Hypocrites!
Fair questions. Another one – Life is so precious, that it must be protected, but not so precious that we shouldn’t kill certain convicted criminals?
I don’t see the conundrum. The answer to the question is in the premise. If life was precious to the murderers, then they wouldn’t have murdered. They condemned themselves by their own hand, and forfeited their lives. Society is only honoring the convicts beliefs and honoring the memories of the victims; and at the same time deterring future acts. They punched their own ticket. They’re off the island.
All life isn’t precious. Some lives are precious, and some are not. It’s a sliding scale, with murderers past the point of any value. Why should society pay to keep these individuals alive? What benefit is there? If they believe in a god, perhaps he/she/it will grant them redemption in the next life. Don’t look for it in this one.
You yourself said lettuce is less precious life than human. Upon what do you place this premise?
Is a lion more precious than an antelope? Is an elephant more precious than a rat? All of them is life. Yet lions kill antelopes, and it seems natural. All have brains, beating hearts, and feel pain. So does chicken, yet most of us eat chicken.
Would a human embryo at the point of it having a beating heart and 1000 brain cells be more precious than a 10 year old kid?
Can you really assign something as small as a single kernel of corn as much value as a born baby or a child?
For arguments sake let’s use number of brain cells multiplied by “innocence” as a measure of preciousness for the lives of animals and humans. If you have any better measure please say so. With this measure I would say no.
Life is only as precious as what we assign them. If you go by the logic that the embryo is precious because of the potential of what it could becomes, then all of your sperm is half as precious as a baby.
The same goes for how human life is automatically much more precious than animal life. It’s just the value we assign to it.
There is no measure of preciousness of life at any stage that is not based on a premise or assumption that can’t be proven.
I’ll bite on that one.
Lettuce has no consciousness; people do. I believe there is greater value in life with higher levels of consciousness.
Further, I think it’s macro-prudent to favor one’s own species over others. If a driver is confronted with an emergency and must chose to swerve left and run over a child or swerve right and run over a squirrel, I believe it’s in the best interest of humanity for that driver to chose to run over the squirrel.
Not interested in an abortion debate, but… sperm is alive too, as are eggs. Think of the millions of “lives” you’re responsible for ending!
You are conflating natural processes with the extermination of a human life that experiences pain. That’s not very scientific of you.
Grr, you’re defining a period of a living organism, and identifying that as “life.” I’m just rolling back your scale to pre-conception.
A fetus meets the definition of a living organism, while reproductive cells do not. I’m glad I could clear that up for you.
So when you kill a fetus, you are not only killing it, you are also nullifying the lives of the millions of sperm who died in vain to create it and the other eggs lost in the process. That’s even worse. Abortion isn’t just murder, it’s mass murder. Is that your point, counselor?
No, the point is, why is the “killing” of a fertilized egg different than the “killing” of an unfertilized egg?
Life is an accident. It stems from the random ordering of molecules a few billion years ago.
There is nothing inherently precious about life except the value we assign it.
I choose to assign more value to sentient beings than the embryos which may one day become one.
Okay, that’s perfectly reasonable. I’m with the SCOTUS on this one. It’s complicated, and therefore viability is the point at which the state may protect the soon-to-be-person.
If there is nothing inherently precious about your life, then why not just end it all by jumping off a bridge?
Did you just resort to a straw man argument? I’m disappointed Mellow Ruse.
I don’t think so. My only point was that we should value the lives of others as much as we value our own. His arbitrary assignment of preciousness fails to do that.
Sorry Mellow Ruse, I am very egotistical and self-absorbed, therefore I value my life more than yours.
I’ll admit, my assignment of preciousness is entirely arbitrary.
LOL! +1 MrBahn.
Causation. Without interference the fertilized egg will become a child. The unfertilized egg will never be anything more than an egg.
As with most controversial decisions, SCOTUS is balancing interests. Often, this is based on the politics of the time. It has something to do with right and wrong, but only when viewed through the lens of popular opinion. They could either make abortion legal, illegal, or both. Viability was the compromise. Not because it makes sense, but because it was determinable, and therefore enforceable. I believe that SCOTUS will eventually revisit this issue, as they have with many others, as popular opinion evolves.
Personally, I think they balanced the interests incorrectly. Between a few months of discomfort and an entire human life, the life is more important. If the life of the mother is endangered, then the interest shifts back to the mother. Adoption is always an option.
Uh… this process “get the interest rates up bit by bit” began
around Nov of last year….
1 yr ago, actual FFR was 0.08
Today, the actual FFR is 0.14
FFR target: 0.25 LOL!
http://www.bloomberg.com/quote/FDFD:IND
Where you been? Vacationing in Costa Rica again?
Next door neighbor down there HAD to sell. Great guy too, so I wanted to help him out. Now sitting on ~3 acres instead of 1.3 😀 Had the fence knocked down and house razed this past week. Not much of a vacation 😉
Wow.. What are you going to do with all that land? My wife studied in Costa Rica for six months and lived with two different families when she was in college. She loved it there. When the kids get a little older we’ll plan a family trip, so I can check it out.
Sounds like an interesting trip. Welcome back.
“The world economy is like an ocean liner without lifeboats,”
Which is an improvement over 2008 when the world economy was an ocean liner without an ocean. Now that the world economy is out of dry-dock and the ocean is liquid, the Fed wants to drain it again.
“We can’t have a buoyant economy and liquidity at the same time. It might actually go somewhere.”
[…] Federal book underestimates sensitiveness of housing to home loan prices Even though the evidence of housing industry's severe sensitivity to mortgage interest levels is persuading, the true estate economists on federal reserve haven't figured this away. They don't foresee the upcoming issues rising mortgage prices … Find out more on OC Housing News (weblog) […]