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Demand for housing not dependent on interest rates

Study: Increasing wealth, new mortgage products helped renters buy homes

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The housing boom that followed the dot-com bust was not an artificial bubble created by low interest rates and speculation, but a product of increasing wealth, changing demographics, and new mortgage products that helped renters become homeowners. That's the conclusion of a study by two economists at the Federal Reserve Bank of Chicago. If the study's assumptions are correct, it suggests there are solid economic fundamentals underpinning housing demand, and the current slowdown in the housing market won't amount to a bust. The conventional wisdom is that the Federal Reserve helped fuel demand for housing by slashing interest rates to historic lows after the stock market tanked in 2001, economists Jonas D.M. Fisher and Saad Quayyum say in their study, "The great turn-of-the-century housing boom." (Study can be found at this link: Those who subscribe to that theory say easy credit encouraged speculators to...