Markets & Economy

Is housing news good news or bad news?

We're still a long way from normal

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Trying to make sense of economic news and its effects on mortgages and home buyers and sellers feels more like a game of Chutes And Ladders than rational analysis. Heaven knows the Fed itself is confused. Interest rates fall on bad economic news because a slow economy does not generate inflation. But for low rates to be good news for housing, people need to have jobs and rising incomes. Does all of this just cancel out, like the apparent damage of low oil prices wiping out the benefit of buck-seventy-five gas? Sometimes -- but not this time, and the key is the difference between the last two economic cycles and economy/housing normal. In a normal economic cycle, when the Fed gets too worried about inflation it is forced to jack rates too high, so high that we have a recession. The immediate cause: housing crumples when rates get too high. So it was and had been throughout the Fed’s history. Until 2000 ... In 2000, the Fed had raised rates, but the economy fell out ...