There are two forces that are giving the real estate market a false appearance of recovery today. They are the bulk investors and Ben Bernanke. Just imagine where the real estate market would be if either party were absent. Comparing the current condition to the subprime bubble, there are two similarities. The Federal Reserve is instrumental in starting the bubble while Wall Street provides the endless supply of air.
Let’s start with Bernanke
Under Bernanke, the Fed launched three rounds of ‘QE’ plus ‘Operation Twist’ in between. One of the objectives is to drive mortgage rates lower. In theory, that should stimulate housing. Using $1,000 per month as the amount of mortgage payment that a borrower can afford, these are the loan amounts at various mortgage rates: click here to continue reading