During the height of the pandemic, the nation’s central bank, the Federal Reserve (aka The Fed), started a new round of bond purchases that swelled its portfolio of mortgage-backed securities to $2.7 trillion from $1.4 trillion it held in February 2020.
That created ultra-low mortgage rates which heavily stimulated home buying and refinancing activity in America.
To combat inflation, the Fed is now planning to let its holdings shrink as securities get paid off, writes Neil Irwin in his recent Axios post called “The Fed's $2.7 trillion mortgage problem.” The problem is that “[e]xtracting itself from this market risks crashing the housing industry and creating intense political blowback for incurring financial losses.”
Irwin writes that the Fed’s pandemic actions to loosen up capital unseized a market and fueled a housing boom, but the opposite reaction could lose U.S. taxpayers billions and be bad for housing.
Since housing is 15% of the U.S. economy, these decisions will have major implications.
Upzoned Host Abby Kinney asks her podcast guests, Strong Towns President Charles Marohn and Andrew Ganahl, an infill developer in Kansas City who used to work for the U.S. Treasury, to put it into perspective on this edition of the podcast.
Additional Show Notes“The Fed's $2.7 trillion mortgage problem,” by Neil Irwin, Axios (May 2022).
Abby Kinney (Twitter)
Charles Marohn (Twitter)
Theme Music by Kemet the Phantom.
COVID-19 and the Boom in Multigenerational Housing
Winds of Change in Kansas City
Local and Diverse > Networked and Global
Has the West Made a “Cult” of Home Ownership?
This $15 Trillion Market Is On the Verge of Collapse
Bonus Episode: The Bottom-Up Revolution
"We Can't Micromanage Great Urban Design Into Existence."
Winter Is Coming: Will Restaurants (and Customers) Adapt to Help Businesses Survive?
Why Cities Shouldn’t Wait for the Feds to Do Something about Reparations
Fragile Policies are Making California More Vulnerable to Megafires
For City Planners, Community Consensus Shouldn't Be the Standard
For U.S. Transit, "Death Spiral" Shouldn't Have Been an Option in the First Place
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Pandemic Fallout: Will New York City Experience Long-term Decline?
"This Makes No Sense": An Ill-Fated Comprehensive Plan in Texas (and Why It Matters Where You Live)
Finding a Room to Rent in Boulder Won't Get Easier Anytime Soon
Help Shape the Future of the Strong Towns Podcasts
How Do You Solve a Problem Like Housing Prices?
Down to Earth: Time to Re-examine the Hype around Skyscrapers
A Better Use of Federal Infrastructure Spending
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