Hot US real estate a potential red flag: Fed’s Rosengren

Hot US real estate a potential red flag: Fed’s Rosengren

American housing prices continue to rise, signaling a potential problem if another economic downturn were to occur. As the housing market was a central component of the financial crisis of the late 2000’s, Eric Rosengren, President of the Boston Fed, says we are approaching a situation that is similar in many ways. Last year, bank holdings of commercial and apartment mortgages rose 9% and 12%. The sharp rise in prices and real estate assets owned by banks could have vast negative impact on the U.S. economy if a downturn occurred. Interest rates are the usual tool for guiding the economy which regulators tend to use, but Rosengren says this situation may not be contained by a simple rate adjustment.

 

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