Another housing bubble is inflating fast thanks to the Fed's easy money policies, Ronald Reagan's former budget director warns.
Worse yet, another crash in home prices is on the way when the Fed starts pulling back from its massive monetary manipulations, David Stockman, former director of Office of Management and Budget during the Reagan Administration, tells the Daily Ticker.
It's a prediction that comes with prices and rents having just taken another big leap. Trulia reports this morning that asking prices for homes jumped another 5.9 percent in January over the same month in 2012.In fact, prices for homes in the Boston area jumped 4.5 percent in January. And if you think that was bad, take a look at asking rents, which jumped 6 percent, according to Trulia.
Given the official jobless rate is still near 8 percent - and the number of semi-employed is far higher - it's clearly not the economy that is driving up home prices and rents.
Back to Stockman. Let's face it, the warnings of Reagan's budget chief may ring a little hollow to some. After all, it is a little bit like the pot calling the kettle black, given the massive budget deficits Stockman oversaw during the Reagan years.
But by all means, read on. I will just cut to the chase - here's the interview posted by the Daily Ticker.
"I would say we have a housing bubble - again," Stockman told the Daily Ticker. "We don't have a real organic sustainable recovery, because in a world of medicated money by the central bank, things aren't what they appear to be."
Stockman pointed to artificially low interest rates and speculation in the real-estate market culprits.
"It's happening in the most speculative subprime markets, where massive amounts of 'fast money' is rolling in to buy, to rent, on a speculative basis for a quick trade," he said. "And as soon as they conclude prices have moved enough, they'll be gone as fast as they came."
Any kind of interest-rate increase will lead to a bust, Stockman said.
"As soon as the Fed has to normalize interest rates, housing prices will stop appreciating and they'll probably head down," he explains. "The fast money will sell as quickly as they can and the bubble will pop almost as rapidly as it's appeared. I don't know how many times we're going to do this, and the only people who benefit are the top one percent - the hedge funds , the LBO funds, the fast money people who come in for a trade, make a quick buck, and move along to the next bubble."
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