The housing market seems to be out of the controlling grasp of the Fed these days. In a Floyd Norris column this weekend “Unending Housing Boom Tosses Aside Rate Increases and the Old Rules” [NYT] [1] he makes the following observations:
- The current housing boom has survived 11 rate increases by the Fed
- The Fed said housing was now cooling yet 183,000 housing starts occured in September
- The current housing boom has fewer starts than the peak in 1972
- The volume of housing starts does not have the same volatility as it did 20 years ago
Whats different now?
- S&L’s used to have to stop lending when Fed rates went above levels banks could pay on savings
- The Fed is now having trouble slowing the boom as creative financing keep payments affordable
- Builders hear the Fed’s concerns over excess supply but their customers keep buying
- The market has changed, 44% of housing starts were multi-families in 1972 and its now 17%
- Single family development dominates residential construction
Also see The Unending Housing Boom [Big Picture] [2]