Dr. Housing Bubble 11/13/13

[Crewleader]

How much control does the Fed have on the housing market? The current state of housing and the Federal Reserve. Fed now owns roughly 12 percent of home mortgages.

The Fed is the housing market. That sentence is often thrown around but there is little hyperbole here. Since September of 2012, the Fed has essentially purchased all mortgage backed securities (MBS) issued. This is a massive deal for the biggest household debt market on the planet. The Fed started QE1 memorably on December of 2008 and this phase ended in March of 2010. QE2 started in November of 2010 and ended in June 2011. QE3 started in September and 2012 and has been dubbed “QE infinity” since the Fed is now essentially purchasing all MBS issuances with no stop date planned. The perception is that the Fed can fully control interest rates and to a certain degree this is true (or was true). But why did rates rise more than 100 basis points this year at the apex of Fed MBS buying? First, QE has been going on for nearly five years now. The “market” is fully manipulated. Looking back at the last half decade of data, we find that current Fed policy has been a boon for investors and has priced out many American households.

http://www.doctorhousingbubble.com/federal-reserve-share-of-mortgage-market-how-much-fed-owns-of-mbs-mortgages/#more-6990

[Crewleader]

1. Cash Flow