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Our housing prices posting the biggest annual gain in seven years in March jumping ten and a half percent compared to a year ago.
The recent data released by the Federal Housing Finance Agency suggests.
Higher prices could be a result of the Federal Reserve's lower interest rates.
Do you think is the -- on the -- up bought by policy creating a new housing bubble or is it surreal this housing recovery.
-- -- -- former Fannie Mae chief credit officer and executive vice president you better think he's been thinking about one today when we see the Dow at 151000.
Lot of people wonder if the market is pumped up artificially.
Let's focus on housing where this 151056.
Some people at the beginning of the -- -- we might hit this towards the end of the year but now we get word that home prices.
Or up between eight and 10% over last year.
Why is not great news.
Well is it what would be great news is if house prices are going up in line with incomes and they're not.
-- -- are going up 2% -- that's a clue to how does that something's wrong that that didn't -- is not going up to the same degree that -- you've registered the only way house prices -- -- like this nationwide.
Is -- -- lower interest rates and that's what the Fed is engineered the Fed's goal when they said Q we infinity I call -- back in September.
Was to drive interest rates even lower and drive house prices up that's their goal the problem is those -- capitalized into the house price.
Okay that was my follow up questions -- you've got these record low interest rates for a long period of time right now and it's basically.
-- sellers village to increase the price because they don't -- and there -- you know you're getting cheaper mortgage.
And the buyer -- -- different because the monthly payment stays the same again it's not buying a car.
A monthly payments is saying but the reality is they're picking on a much bigger more and is selling inventory issue to where it is Islam out of homes they're forcing on the market because of pending foreclosures are homes that -- there is and that's another problem I mean when when house sells.
Everybody thinks like in the stock target -- well my stock is worth in my house worth exactly that that the differences the stock market -- -- as leverage if the stock market were correct.
20% yeah I would be painful but most of that money is real equity and the housing market -- leveraged by the government put out by our itemized or at least the stock -- his leverage and I privately we learned that it get a lesson back in the good in the twenties in the early thirties we haven't -- didn't the government is financing 90%.
From new mortgages and of course the Federal Reserve is buying up all of the mortgage backed securities -- most of the overwhelmingly most of the what would happen.
If the Fed stop buying those mortgage backed securities I think you've got the Fed stopped buying those -- you have an immediate drop in the price of the securities.
Which would create a problem for those who -- the securities but also would drive up.
The rate of -- mortgages then if the Fed started pushing interest rates up which it has to do at some point.
-- have a double whammy -- what I've calculated is.
If interest rates went from about three and a half percent were there today to six which is not a huge increase and has to happen at some point in the next few years I think.
-- either have to have incomes -- the third.
House prices go down a quarter or loosen lending standards and the drum -- are going for looser lending.
-- it sounds eerily familiar to 20072008.
-- thinks this cycle will sort out what's that I'm back.
Think we're looking 34 years down the road -- as having a problem because on top of that you have all these investors who were putting their money in these by two ranked.
Well that's hot money anytime you have -- -- real estate I get really nervous again.
People who are looking for a return when that return doesn't pan out.
They leave the market that has a disproportionate impact on some prices and Ed Pinto knows what he start to raise the former chief credit officer for Fannie -- great to see -- -- -- -- well that.
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