Source: The Business Times —
THE Federal Reserve suggested on Friday (Nov 4) that lofty home prices could be susceptible to steep declines after big run-ups in recent years on the back of ultra-low interest rates.
“With valuations at high levels, house prices could be particularly sensitive to shocks,” the Fed said in its semiannual Financial Stability Report released on Friday.
Though housing price increases have slowed recently as the Fed has raised interest rates, valuations remain stretched when compared with such metrics as rents, the central bank said. It also cited “strained” liquidity conditions in the Treasury and some other crucial financial markets; elevated leverage at hedge funds; and high commercial real estate prices when compared with market fundamentals.
Fed chairman Jerome Powell has taken issue with warnings that the US is on the verge of another economically paralysing housing bubble bust akin to what it suffered some 15 years ago, arguing that lenders have been much more careful in extending mortgages this time around.
;
