The Fed’s sustained purchase of mortgage-backed securities post-crisis isn’t just an oversight; it’s a massive market distortion. For years, they created artificial demand that kept mortgage rates unnaturally low, making homeownership seem more accessible while inflating home prices. The truth is, we’ve been living in a housing bubble held together by Fed policy. The ramifications are too important to ignore, and this should be part of the broader conversation every time the housing market is discussed.
"In 2009, the Fed began manipulating mortgage rates by buying mortgage-backed securities (MBS) for the first time. This extra demand for MBS drove mortgage rates down. A few years later, these purchases helped stabilize home prices"
— Lance Lambert (@NewsLambert) February 13, 2025
You can read John Burns' full article here: https://t.co/8x2LwN0yC3
He is pushing back at some of the comments Fed Chair Jerome Powell made yesterday pic.twitter.com/VD4GToMG6f
— Lance Lambert (@NewsLambert) February 13, 2025
MBS = Mortgage Backed Security
When demand for MBS rises, yields fall (i.e. lower mortgage rates)
When demand for MBS falls, yields rise (i.e. higher mortgage rates)
— Lance Lambert (@NewsLambert) February 13, 2025
Here’s the full chart that @johnburnsjbrec is citing pic.twitter.com/60jSj93493
— Lance Lambert (@NewsLambert) February 13, 2025