Steve Forbes: Fed Reasoning on Housing is 'Backwards'

Friday, 09 Mar 2012 07:58 AM

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The Federal Reserve has kept interest rates low and monetary policy loose in part to prime a rebound in the housing market. But in reality, the Fed's tactics are only hurting the sector, says publisher and one-time GOP presidential hopeful Steve Forbes.

"In reaffirming its near 0 percent interest rate policy for another three years the Federal Reserve averred that this was — necessary to revive the housing market, which, in turn, was necessary for the economy to revive," Forbes writes in his magazine, referring to the Fed's stated forecasts that benchmark lending rates will likely stay low through 2014.

"This reasoning is arse backwards. A strong economy — and minimal government interference — would rapidly revive the housing market," Forbes says, pointing out that loose monetary policies pushed up housing prices in the first place. 

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

"People who want to buy houses, which includes most of us, buy them when we can afford to do so. Only during the Fed-created bubble were millions of people with insufficient incomes purchasing homes with mortgages that were far beyond their capacity to service."

On top of Federal Reserve policies, President Barack Obama's policies are preventing recovery in the housing market as well.

Stimulus measures have added to the country's debt burdens, while the Dodd-Frank financial overhaul law as well as the Patient Protection and Affordable Care Act have fueled regulatory uncertainty.

"Let’s hammer this point home: Government and Federal Reserve 'stimulus' for housing won’t put our economy on a vigorous and sustainable growth trajectory," Forbes writes.

"Other things — sound money, low tax rates, less spending, repealing ObamaCare and Dodd-Frank —will."

Housing prices appear to be bottoming out, but don't expect them to shoot back up, experts say.

"Once we hit bottom it will be a long rocky affair, lasting two to four years," says Stan Humphries, chief economist at Zillow Real Estate Research, according to U.S. News & World Report.

"Price appreciation will be fairly tepid. I don't expect to get back to a normal market for a few years. We're approaching a bottom but the bottom could last a long time."

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

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