The Federal Reserve and its army of economists continue to demonstrate willful ignorance of their failed policies. This week it was the Kansas City Fed’s Jordan Rappaport who penned another dose of misdirection on the housing market. Rappaport’s piece, “Pent-Up Demand and Continuing Price Increases: The Outlook for Housing in 2018” is yet another example of how the Federal Reserve touts itself as a champion of real economy while they continue toe the line for Wall Street and wealthy investors.
In the usual captured culture of Fed Mr. Rappaport lays out the theme of continued price increases with “pent-up demand” in housing during 2018. He mentions the typical problems of home price inflation, land use regulation and a shortage of qualified labor, yet mysteriously Rappaport doesn’t even mention one of the primary drivers of these problems that continues to plague the housing market.
For all of their experience and “senior” status, many of the Fed’s economists appear to be amazingly dense when it comes to the problems facing the housing market, which is not surprising since the Fed caused most of these problems by intervening in markets at every turn. Calling out your employer’s cronyism and misdeeds is not a recipe for long-term job security. “The first rule of Fight Club is: You do not talk about Fight Club”.
The Fed is a primary cause of elevated asset prices in the U.S., particularly the prices of homes and land. It is not a mystery why multi-family housing construction has soared during this latest “recovery” phase of the business cycle even as single-family starts have lagged. It is no mystery why the supply of existing single-family homes for sale remains depressed, after the Fed amassed a $4.4 trillion dollar balance sheet to feed Wall Street and private equity slumlords. Amazingly, Rappaport opines that the share of adults age 30-34 living at home swelled to 15 percent in 2016, yet he can’t mention how the Fed caused the spiraling inequality leading to this dynamic. Not surprisingly, Rappaport offers no insight into how ZIRP, QE1, 2 and 3 distorted asset markets across the board.
In our world of morally bankrupt puppets, senior economists at the Fed are ready and willing to offer their alternative facts and revisionist history so that you don’t pay attention to what they are really doing. Pay close attention to the Fed’s balance sheet unwind this year, because regardless of the horse manure trotted by Mr. Rappaport and his fellow Wall Street shills, those home prices increases in 2018 are not a slam dunk. It all depends on whether the Fed has the stomach to follow through on that normalization process or if they instead choose to duck for cover in the Chickenshit Club. History suggests there’s a good chance of the latter.
Mr. Rappaport’s views on housing bubbles are reminiscent of Ben Bernanke’s clueless remarks prior to the 2008 collapse.
“Despite these elevated price increases, single-family homes on average do not appear to be significantly overvalued.”