Boston Real Estate 

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KEY POINTS
  • Home prices nationally in January were up 11.2% year over year, according to the latest S&P CoreLogic Case-Shiller Index. That is the largest annual gain in nearly 15 years.
  • As of last week the Federal Reserve held $2.2 trillion of agency mortgage-backed securities..

Home price gains are accelerating at an alarming pace, fueled by Covid pandemic-related inflation, which some claim is not getting enough attention from the Federal Reserve.

Home prices nationally in January rose 11.2% year over year, according to the latest S&P CoreLogic Case-Shiller Index. That is the largest annual gain in nearly 15 years.

As a comparison, annual price gains were 10.4% in December, 9.5% in November, 8.4% in October, 7% in September, 5.8% in August and 4.8% last July. In January 2020, the annual gain was just 3.9%, and the monthly moves were in small fractions, not whole percentage points.

Dr. Frankenstein, in Mary Shelley’s famous novel, sets out to do something that he thinks is good. He ends up creating a monster, not what he intended. In the wake of the pandemic, I understand why the FED lowered the interest rates to historic lows. But did the FED’s create a monster?

The extraordinarily low interest rates in place today are a boon when you’re buying a house, refinancing a mortgage, leasing a car or paying off student debt. If you qualify for a loan, low rates can help you spend less and get more.

But there is a dark side to falling interest rates. While they are helpful for qualified borrowers — and have contributed to tremendous returns for people who have held bonds for many years — they are terrible for savers.

Have We Created a Monster?

Live on less, dip deeply into savings or take on more risk in the stock market: Those are the nasty choices that many people will probably be facing. The dilemma is most pressing for those planning for retirement or already in it.

 

Boston Real Estate 

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