To this conservative, a recent New York Times column that encouraged the Federal Reserve to take actions focused on bringing down mortgage rates brought to mind the old Yogi Berra quip about “déjà vu all over again.” Have federal officials intervene to make mortgages more affordable and accessible? What on Earth could go wrong???
Sarcasm aside, the article accurately diagnoses the problems facing the housing market, and ultimately the economy, as a result of current interest rate policies. But particularly given events of the last several years, count this conservative highly skeptical that the “solution” to a problem caused in part by poor Federal Reserve policy can come via yet another policy intervention by Fed officials.
‘Frozen’ Markets
The opinion column, by investment banker Daniel Alpert, observes what I wrote about a few short weeks ago: Namely, the spike in mortgage rates — caused by the Federal Reserve rapidly raising its interest rate benchmark since early 2022 to fight inflation — has effectively frozen the housing market. Households that locked in mortgage rates at or below 3 percent during the pandemic will not want to move if doing so means they would have to pay current mortgage rates approaching 8 percent.
Many signs point to stasis: The supply of houses on the market remains low, as people do not want to sell. Because mortgage rates have spiked while prices have maintained their pandemic-level highs, would-be buyers feel an affordability squeeze; many have stopped looking.
Alpert also observes another important knock-on
