Out here in flyover country there appears to be a tug of war between the Titans, Bernanke and Obama with average Americans stuck in the middle.
Bernanke seems to ignore the inflationary hazard of monetizing the debt purchasing Treasuries, and mortgage backed securities by printing $85 billion monthly from thin air. This is known as QE4.
Combine QE4 with Bernanke’s ZIRP (zero interest rate policy) and we discover mortgage interest rates have fallen below 4 percent in only 15 months dating back to 1971. The preceding 15 months according to NAR President Gary Thomas.
Without these extraordinary actions the housing market may not have a pulse. Growth in home sales or prices isn’t due to any improvement in the job market or because the average American is getting pay raises.
Instead the cheapest money on record has drawn pent up demand to the market accounting for the majority of home sales.
This has resulted in the following headlines:
Forbes: Home Prices Growing As Fast As Before The Housing Collapse: Case Shiller. (Doesn’t that cause you pause?)
USA Today: Home prices jump, but new home sales decline.
Reuters: Lean Inventories hold back pending sales. (Really?)
Business Insider: Existing Home Sales Rise 0.8%, Prices Rise 12th Straight Month (Sounds great!)
As reported in the Forbes article TownHall contributor Peter Schiff of Euro Pacific Capital, believes “a housing collapse is in the cards as the Fed will eventually have to exit its accomodative stance”.
Forbes continues with Baird of Plante Moran stating in part, “improvement in housing is still viewed as a key bellwether indicator of the impact of the wealth effect, the health of the consumer sector….it seems to point to a continued modest expansion, and an economy that is neither falling off a cliff nor firing on all cylinders”.
Then there is Charles Hugh-Smith Of Two Minds Blog posting at ZeroHedge- Why The Government Is Desperately Trying To Inflate Another Housing Bubble. In essence to save the too big to fail banks (TBTF).
That leads us to Obama tugging in the opposite direction of Bernanke. While Bernanke takes these extraordinary steps to build a fire in housing, Obama’s mission to concentrate power in the federal government rains on the embers.
Hugh-Smith is right, the big banks own the political class as the Dodd-Frank monster codified TBTF, however in the power grab for the state to control lending, Obama has created numerous obstacles for financing home loans and providing credit to the small home builder.
-TownHallFinance.Com