The Fed is Not Worried About The Housing Market – Should You Be? – Podcast

Home sales are down but home prices are up. The Fed is not worried because to them rising home prices means there is a “recovery”.

JM Bullion

Podcast Summary

0:00-7:43 Intro

The Fed’s Goal is Rising Stock and Home Prices

7:43- 10:08 The Fed is not concerned about slowing home sales or the poor first quarter GDP growth of .1% – the weather can be blamed. Fed Chair Janet Yellen forcasts a brighter second quarter, blaming the slow economy on “transitory factors, including the effects of the unusually cold and snowy winter weather.” The Fed is most concerned about rising home and stock prices.

“Just because housing starts are slower or sales are slower, that doesn’t mean the housing market is weak, because that’s not consistent with a continued increase in prices,” he said. “I’m not panicky about the housing market.” Philadelphia Federal Reserve President, Charles Plosser. This statement highlights the Fed’s underlying goal-rising home prices irrespective of sales (or lack thereof).

Six Years Later QE Still Not Working

10:08-18:54 – Discussion of the length of Quantitative Easing (QE) – in its sixth year. In 2009 then Fed Chairman stated ““We are printing money and when the economy begins to recover we will stop“. Who is buying the treasuries as the Fed tapers? Is the Fed really tapering QE? Belgium’s involvement is discussed. If the Fed does not buy bonds, interest rates should rise based on simple supply and demand analysis. Does the Fed care if there is economic growth or are they just concerned with rising asset prices which they have achieved? Discussion of all cash purchasers and lack of demand in the housing market. Bond, stock and gold price manipulation is discussed in relation to their fundamentals.

New Looser Lending Guidelines to Come From Freddie Mac and Fannie Mae?

18:54-26:45 Discussion of how loosening lending guidelines might boost housing sales, or not? Discussion of how the Fed, Congress and the Treasury Department work in conjunction to manipulate the stock and real estate markets. Discussion of China and Russia’s exit from the US treasury market. Discussion how market manipulation and government intervention could continue to boost the real estate market.

Do Realtors Prefer Rising Home Prices or Increasing Sales?

26:45 -31:29 Discussion of how rising prices help a smaller number of real estate agents than a real estate market that has flat prices but increasing sales. Rising prices help add inventory to the market.

31:29-36:00 Discussion of the fate of QE. Will the Fed reverse course on the taper if the economy continues to decline? Covert QE is discussed. Discussion of the Fed’s potential options if the stock market crashes.

Home Equity Loans

36:00 -39:00 discussion of the increase in the home equity loans. Home equity will evaporate as home prices drop from their highs as more people list their homes for sale.

Can More Home Buyers Be Generated with Change in Lending Guidelines?

39:00-44:40 discussion of the potential that looser lending standards might have on the housing market.Comparison of the economic circumstances and job markets of the mid 2000’s to today. In order to get the same volume today as there was in the mid 2000’s they will probably have to pay people to buy homes.

The Disconnect Between the Haves and the Have Nots

44:40 discussion of the disconnect between those with good jobs and those without and between home owners and renters and the lack of realization by some that many don’t have $2000 in the event of an emergency. The people on Wall Street and reporting the news have a different perspective on the economy. They live in an rising asset economy rather than a stagnant wage economy . Discussion of the removal of the ability of people to participate in the setting of prices by negotiation. Comparison of prices (lower) in the free market (computers, electronics) and prices (higher) where the government is involved (housing, higher education, health care)
Discussion of the creation of cash flow businesses to meet consumer needs vs the creation of speculative businesses to meet Wall Street/Venture Capitalists’ needs. Discussion how the Fed wants people to believe in the recovery, the housing market and speculative stocks.

Fed: Rising Asset Prices are More Important than Rising Wages

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Further Reading:

The Fed Blames the Weather

Royal Canadian Mint

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