US Home Prices Rise at Fastest Pace in 15 Years... Will Tightening Accelerate?

March Housing Price Index Rises 13.2%... White House Also Says "Worrisome"
Possibility Grows for Earlier Timing of Fed's Quantitative Easing Reduction

[Asia Economy Reporter Byunghee Park] The rise in U.S. housing prices is becoming serious enough to prompt concerns from the White House.

According to Bloomberg on the 25th (local time), the S&P CoreLogic Case-Shiller National Home Price Index, a representative U.S. housing price indicator, rose 13.2% year-over-year in March, marking the highest increase since December 2005. This housing price index has risen for 10 consecutive months, with a significantly higher growth rate than February's 12%. White House Press Secretary Jen Psaki said to reporters after the index was released, "The Biden administration is closely monitoring U.S. housing prices" and "We are concerned about prices rising to levels that are unaffordable for ordinary people." Psaki added, "It seems necessary to increase the supply of new housing."

Robert Shiller, a Yale University professor and 2013 Nobel laureate in Economics who devised this index, also recently expressed concerns about the rising housing prices. On the 21st, he appeared on CNBC and said, "Housing prices have never been this high in real terms," adding, "Even looking at over 100 years of housing price data I have collected, this is a special case." Professor Shiller expressed worry that the current housing price situation is similar to that of 2003. He pointed out that from 2005, two years later, the housing price growth rate gradually slowed, ultimately leading to the 2008 global financial crisis.

As voices worrying about the rapid rise in housing prices grow louder, controversy surrounding the Federal Reserve's (Fed) monetary policy is also expected to intensify. The Fed is currently implementing a quantitative easing policy, purchasing assets totaling $120 billion monthly, including $80 billion in Treasury securities and $40 billion in mortgage-backed securities (MBS). While Treasury purchases have an effect, MBS purchases in particular lower the cost of buying homes, thereby driving up housing prices. Consequently, there are forecasts that the Fed will reduce MBS purchases.

Fed Vice Chair Richard Clarida said in an interview with Yahoo Finance on the 25th that the Fed should discuss reducing the scale of quantitative easing at the next Federal Open Market Committee (FOMC) meeting. While Wall Street currently expects the Fed to taper quantitative easing by the end of this year or early next year, the timing could be moved up.

James Gorman, CEO of U.S. investment bank Morgan Stanley, predicted at the online Nikkei Financial Conference on the same day that the Fed will take a further step and raise the benchmark interest rate early next year. Contrary to the Fed's view that inflation is temporary, he suggested that the current inflation could be structural and long-term.

This content was produced with the assistance of AI translation services.