Back in 2005 Federal Reserve Chairman Greenspan told us “there was a little froth in the real estate market.” Yet that was not what his economists were telling him at the time. The Federal Reserve has a 5 year moratorium on it’s meeting notes being released so we are now just being told the reality of the situation.

Instead of a little froth his economists were telling him that prices were overvalued by 20% at the time.

During 2005, the Fed raised interest rates a quarter-percentage point at every meeting, unwinding the ultra-loose policy it pursued earlier in the decade to address deflation worries after the 2001 recession. The economy at the time was growing at a healthy pace with few signs of overheating. But with reports across the U.S. indicating a bubble in the housing market, the Federal Open Market Committee spent time assessing the appreciation in home prices and what, if anything, the Fed could do about it. Fed staff economists had found that housing might be overvalued by as much as 20%, based on the historical relationship between prices and rents. via the WSJ

Comments

comments

Call Now