The Housing Bubble: How Much Blame Does the Fed Really Deserve?

William Miles

Journal of Real Estate Research, 2014, vol. 36, issue 1, 41-58

Abstract: Two recent empirical papers have blamed the Fed for the latest boom and bust in housing. Neither study includes long-term interest rates, which are more affected by global factors than the federal funds rate (FFR). In this paper, I include both the mortgage rate and the FFR as determinants of housing variables. The results indicate the long-term rate has independent and sometimes greater predictive power for housing than the FFR, especially in recent years. Finally, I demonstrate that the mortgage rate does not simply proxy for monetary policy—the impact of the FFR on long-term rates has also fallen over time.

Date: 2014
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DOI: 10.1080/10835547.2014.12091380

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