SF Fed President Speaks On Bubble, Economy
The president of the Federal Reserve Bank in San Francisco, Janet Yellen did an interview with ContraCosta Times. Is the interviewer paying attention. "There are some fundamentals that explain why housing is doing so well at the moment. A key one is low interest rates. Mortgage rates remained quite low, and they really haven't risen a lot since the Fed started to tighten monetary policy. Incomes are rising. People feel more optimistic about the future."
Why would low interest rates make house prices go up? The issue of rising incomes is touched on in the interview as well.
"The Bay Area economy has roughly stabilized, but we haven't regained what we lost. We're just growing modestly. I don't think the IT sector has revived and is growing robustly enough at this point to really generate strong growth in jobs here."
The Bay area hasn't had a big population increase. The interview makes one wonder just how rigorous the selection process is for the Fed.
"Is it a bubble? Nobody ever knows for sure until one pops. I wouldn't rule out the possibility that there's a bubble and we could have house price declines ahead."