Dallas Fed says “a housing bubble is brewing”

This week an interesting article came out. Researchers at the Dallas Fed published a report saying that a housing bubble is brewing. This seems super obvious but it’s important to note when the Federal Reserve, that controls our monetary policy, says such things. Now, this isn’t a “Fed Speech”, these are “researchers at the Dallas Fed” but still.

So what did they find?

Reasons for concern are clear in certain economic indicators—the price-to-rent ratio, in particular, and the price-to-income ratio—which show signs that 2021 house prices appear increasingly out of step with fundamentals.


Yes, no shit. San Diego was recently called the most unaffordable housing market in the nation. Not New York, not San Francisco – San Diego. I totally believe it, because income in San Diego has always been rather low. Which is why when I moved back here pre-pandemic, I made sure to get a remote job from San Francisco.

Anyway, so why do the researchers think this is happening?

While historically low interest rates are a factor, they do not fully explain housing market developments. Other drivers have played a role, including pandemic-related U.S. fiscal stimulus programs and COVID-19-related supply-chain disruptions and associated policy responses.

The resulting fundamental-driven higher house prices may have fueled a fear-of-missing-out wave of exuberance involving new investors and more aggressive speculation among existing investors.


Aka it’s not our fault! I like that they don’t even mention mortgage-backed securities here.

Anyway, you can read the full report here, nothing groundbreaking other than they were willing to say the B-word. (Bubble. Bubble is the B-word)

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