Fed official says another boom-and-bust housing market is not sustainable

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Eric Rosengren, the president of the Boston Fed, expressed concern over the housing market in an interview with the Financial Times

“ “It’s very important for us to get back to our 2 percent inflation target but the goal is for that to be sustainable. And for that to be sustainable, we can’t have a boom and bust cycle in something like real estate.” ”

Rosengren noted the financial stability concerns that come from boom-and-bust real estate cycles. In 2008, there was a global financial crisis as the housing market collapsed. Rosengren’s view does not appear to be shared, as yet, by the core of Fed officials who set policy. MarketWatch’s Greg Robb asked Fed Chair Jerome Powell in April about the fact the central bank was buying mortgage-backed securities, which was helping to boost the housing market. Powell did not express alarm.

 

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It seems at first glance that these housing prices won’t be sustainable in a higher interest rate environment. But, supply will continue to be an issue for a couple years…so, who knows.

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