Quantitative Easing and the Housing Market: It's Not About the Money

by: Scott Sambucci

With the focus on international trade, currency wars, and retaliation from foreign Central Banks, there's been relatively little chatter about the Fed's Quantitative Easing (QE2) program and its effect on the housing market.

John Paulson expects inflation to bolster housing, suggesting that now is the time to buy a home if you haven't already. But, even rebuttals to Paulson's perspective recognize only consumer constraints and credit as limits to this logic. Both sides fail to address the housing market's deeper structural problems.

So, I took the liberty of organizing a few thoughts in a short paper - "Quantitative Easing & the Housing Market: It's Not About the Money." Monetary policy does not, and cannot, address the really, really big challenges we're facing - declining homeownership rates, decreasing demand, and the paradox of thrift.

As always, comments and scathing remarks are welcome.

Note: I published an earlier version of this post to the Altos Research company blog - "How's the market?" - last week.

Disclosure: No positions