Monday, December 30, 2013
Drug-fuelled housing market running out of drugs
The Fed is virtually the only buyer of MBSs, using income from maturing bonds to buy more of the same. Now UST yields and mortgage rates are rising, so what's in store? This article shows how the US house market fundamentals ('real affordability') are looking worse but successive stimuli have kept it alive. Are there any more stimuli once the cash-buyer speculators leave? Gist of the argument is in the section "The stimulus-induced housing market pumps and subsequent Ã¢Â€ÂœresetÃ¢Â€Â periods 2003-2013" Bubble 1 depended on exotic/liar loans, bubble 2 on all-cash buyers. What now?