4 ms·
> If there is a problem, the Fed will drop interest rates, maybe even go negative, and that will cause bond rates and conceivably mortgage rates to drop as well
by jonknee 11y ago
> If there is a problem, the Fed will drop interest rates, maybe even go negative, and that will cause bond rates and conceivably mortgage rates to drop as well.
The Fed has very little room to drop interest rates and won't do so to prop up the NASDAQ while the economy continues to grow and add jobs.
- pfarnsworth 11y agoIt's not to prop up the Nasdaq. In the doomsday scenario referred to above, housing prices dropping 30%, salaries went down 25%, etc. This is unacceptable to the Fed and they will do whatever it takes to counter this, including dropping as much money as possible. And they can go negative interest rates which would be crazy, but it's happened before, and currently going on in Japan.
- mitochondrion 11y agoThe Fed is all out of bullets, except for NIRP. And yes, it would (will) be crazy, but only slightly more so than 7 years of ZIRP.
- jonknee 11y agoOutside of a few areas home prices are not absurd. The Fed doesn't care if studios in SF fall to under $2k a month. Same for Valley salaries.
- hiram112 11y agoIt seems like home prices are pretty high historically in a lot of places, not just a few. They've bubbled up again not only in SF, but also in most every single area with job growth - SoCal, the whole I95 megalopolis, Denver, SE Florida, Dallas and Austin, Minneapolis, and the Pacific Northwest. In fact, only parts in the rust belt, South, and Midwest remain affordable, based on historic standards. Unfortunately, the majority of job growth is not in these areas. I do not see how homes can retain their value when Boomers begin dying and down sizing, as they own the majority of wealth in real estate and the next generation is loaded in debt already and not forming large households at the historic rate.