Is there still a potential we could see another Vero Beach housing bubble? A top Federal Reserve official says yes.
A mortgage market bubble in part caused the 2007-2009 financial crisis and Great Recession from which the world's largest economy is still recovering. In response, the Fed has depressed interest rates and is buying $85 billion in assets each month, including $40 billion in mortgage-backed securities (MBS).
But citing rising year-over-year Vero Beach housing prices, Dallas Fed President Richard Fisher warns that the central bank's hyper-accommodative policies could be inflating dangerous asset price bubbles.
Fisher said, "We have to be watchful and realize there has historically been an era of the Fed over-stimulating since the Great Depression."
Mortgage Rates to Blame For Vero Beach Housing Recovery Slowdown
Home resales rose in August and median prices were up 14.7 percent over the previous 12 months nationwide, according to the National Association of Realtors, although other data have suggested a sharp rise in mortgage rates was responsible for a dent in the Vero Beach housing recovery.
The deal approved in Washington to reopen the government after a 16-day shutdown resolves no fundamental differences on spending and taxes that divide Democrats and Republicans. But it also leaves open the possibility of another government shutdown – and potentially another debt crisis – early next year.
Fisher said, "kicking the can down the road for a few months will not solve the pathology of fiscal misfeasance that undermines our economy and threatens our future."
Fisher often blames lawmakers' inaction on resolving long-term U.S. fiscal imbalances for dragging down the economy and hurting the Vero Beach housing market. Though he has also been a vocal critic of the Fed's massive bond-buying stimulus. He said, "continued Fed bond-buying could actually make matters worse, if the U.S. central bank is seen as an agent of financial recklessness."
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