Is The Fed’s Policy Creating A New Housing Bubble?

Edward Pinto, former Chief Credit Officer at Fannie Mae (1987-1989), and current resident fellow at the American Enterprise Institute sees some troubling signs in the current rise in home values and draws a connection between this price rise and the quantitative easing policies of the Federal Reserve. His concerns were published April 9 in the op-ed page of the Wall Street Journal.

He observes that a housing recovery of sorts is happening, but is taking place in a stagnant income environment. The conclusion he reaches is that this recovery in housing prices is "largely driven by low interest rates and plentiful government financing." Deteriorating lending standards, encouraged by federal agencies and government-sponsored enterprises, are helping to create what is essentially a Potemkin-recovery.