Monday , 6 December 2021

The Fed Says the U.S. Is Now Officially In A Real Estate Bubble

…For the first time since 2007 the Fed’s Exuberance Index is warning that U.S. real estate prices are in a bubble. Did the Fed even notice? 

This post by Lorimer Wilson, Managing Editor of munKNEE.com, is an edited ([ ]) and abridged (…) excerpt from an article from Stephen Punwasi of betterdwelling.com for the sake of clarity and brevity to provide you with a fast and easy read. Please note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

…If asset buyers are said to be exuberant, they’re excitedly paying emotional premiums, premiums that are above fundamentals, paid because people think prices will always rise. If buyers are exuberant for an extended period, the whole market can become exuberant…[and the Fed’s] exuberance indicator was designed to help identify [such] bubbles.

…American real estate buyers are displaying obvious signs of exuberance. The exuberance index read 2.8 in Q2 2021, more than double the 1.37 threshold needed to seem bubbly. The most recent quarter was the fifth above the threshold, making it officially a bubble…

Declaring a bubble after just five quarters might seem early, but that’s the point. The indicators help central banks and policymakers identify them early. By alerting policy makers early, they can act and contain the issue before it gets out of control.

The current bubble will be the first time in history that the U.S. has a system in place for an early warning but the question is, will they ignore the warning sign? Central banks have become increasingly political, dismissing even their own research. It wouldn’t be surprising to see them gloss over existing warning systems as they did with inflation…

Related Articles From the munKNEE Vault:

1. Fed’s Exuberance Index Shows Canada’s Real Estate To Be A “Bubble On A Bubble”

The U.S. Federal Reserve’s latest Exuberance Index (Q2), considered a “smoking gun” for bubbles, shows Canada is well into a real estate bubble – a bubble on a bubble.

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