Is Greenspan trying to cool housing market?

[Carolab]

Fed chief, in testimony, signals more rate hikes ahead ANALYSIS
By Martin Wolk
MSNBC
Updated: 6:01 p.m. ET June 9, 2005

Martin Wolk
Chief economics correspondent


Federal Reserve Chairman Alan Greenspan left little doubt Thursday that the central bank intends to continue pushing short-term rates higher. One major reason could be that Greenspan wants to do everything within his power to remove what he calls “froth” from some of the nation’s booming housing markets.

In testimony before a joint House-Senate committee Thursday, Greenspan reiterated that he is puzzled by the decline in long-term interest rates, which has seen rates for traditional 30-year mortgages slide to their lowest levels in more than a year. Such low mortgage rates are buoying the housing market, sending home prices surging at a 12 percent annual rate, according to one recent government report.

Greenspan and the Fed have little control over these fixed mortgage rates, which are pegged to movements in the massive global bond market. But the Fed does have a powerful influence over one important segment of mortgage rates through its control of short-term bank lending rates.

“The only part of the mortgage market that the Fed has control over is adjustables,” said Vince Boberski, senior economist at RBC Dain Rauscher.

(MORE)

http://www.msnbc.msn.com/id/8160947/

[hector459]

1. You bet he is! If it is making the "unwashed" wealthy, he will do

whatever he can, just as he did during the last years of the Clinton admin, to pop the "bubble."

[Sgt. Baker]

2. something

something needs to be done. You can't just let home prices keep skyrocketing forever. That's worse for the poorer people than slowly raising the interest rate. I bought my house at 8.9% and refinanced recently at 5.2% My home has also doubled in value. I'll make some money when I sell but can't sell this house right now because I can't afford anything else within 100 square miles of my job.

[slay]

3. My buddy who works in the real estate business told me

that even Republicans are so worried about the direction of the US economy that they are investing in the houseing market to protect their money. Nice homes have real, tangable value no matter how much debt we have or how bad the dollar is doing. He also told me many people involved in the real estate industry voted for Bush BECAUSE of the damage he would do, which would in turn make things better for them and the super-rich, who are often their clients. Pretty sick huh?

[aquart]

4. Voting Republican sick? Nawwwww.

Whyever would you think that?

[slay]

6. Yeah

It just makes me sick that people care more about money than doing what's right. Who knows, maybe I just haven't been offered enough to sell my soul yet. :(

[Sgt. Baker]

7. actually

I am not rich at all. I bought my house for $79,900. I had $650 a month mortgage payment. It was cheaper than renting and I own it. As home values went up my taxes did also. My mortgage reached almost $800 a month until I refinanced. I now pay just under $700 a month. I still don't have much money but I had enough to afford a cheap house nobody recommended I move into in a bad neighborhood. It was a good move. The area had boomed and the neighborhood has been cleaned up considerably. My home is now worth $200,000-$250,000. Somewhere in there.

You didn't need to be rich to get into the housing market. That was not my original intention but it turned out that way. Now that home prices are so insane it is harder for poorer people to get in. Lots and lots of poor people bought houses about the same time I did in 2000. They could afford it back then.

[slay]

8. Right

The rich still have it good, and the poor get screwed again, as usual. One of my relatively poor friends also bought a house back in 2000 when the rates were good. No way could he afford to get that same house today. Bah.

[Carolab]

9. Conversely, some of us in the real estate business believe

that all the "bubble" talk is deliberate on the part of Wall Street to try to scare people away from real estate and back into stocks and bonds

[K-W]

5. Yes, but he is on a fools errend.

He is trying to do the impossible, let the air out of a bubble slowly.