Apparently, if you just print money long enough, asset prices will rise and juice the economy. That is the takeaway news from the front pages of the Wall Street Journal, New York Times and Washington Post Wednesday morning. All three papers have stories on Standard & Poor’s report that the Case-Shiller home price index posted its biggest gain in seven years Tuesday.
According to Case-Shiller, home prices in the nation’s top 20 cities rose 10.2 percent in March from a year earlier. With stock prices also rising, many Americans are feeling wealthier again, sending consumer confidence to its highest level in five years.
But is this really good news?
No one is pretending that any of this good news has anything to do with real economic strength or recovery. It is all a result of the Federal Reserve’s easy-money policies that are creating an unprecedented $85 billion in new cash every month. But only the Wall Street Journal seems at all concerned what will happen to the economy once the Fed’s printing press stops.
“The trouble is that that impression is almost entirely the function of low mortgage rates,” Zillow Inc. chief economist Stan Humphries told the Journal. Cheap credit is “distorting housing considerably,” he continued. Homebuilder John Burns is also worried about the post-printing-press world. “What happens when [mortgage] rates go back to 7%?” he asked, “We’re going to have a bust.”
Then comes the bust
Separately the Journal also reports that house-flipping is back big time in the country’s hottest real estate market: California. According to PropertyRadar, the number of homes sold and resold in six months is at its highest level since 2005. More than five percent of all homes sold in the state were flippers.
Things are not going to be as bad when the music stops this time, though. Thanks to tighter bank lending standards, only those with cash are able to play the flipping game this time around. So, when lending rates to go up, and home prices stop rising, we will not have a bunch of properties underwater on their loans.
Still, it would be nice to have an economy that wasn’t dependent on asset speculation for growth.
From The Washington Examiner
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Sean Higgins: Unions have second thoughts about ObamaCare
Byron York: Months later, little is known about military role in Benghazi
Michael Barone: Liberals’ urge to self-destruction
Joel Gehrke: Obama’s top economic adviser leaving the White House
Tim Carney: Amid cries of “tech-labor shortage,” tech wages fall
Conn Carroll: NumbersUSA attacks Schumer-Rubio on unemployment in 16-state ad buy
Diana Furchtgott-Roth: Fed’s easy money policies can’t go on forever
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