The Federal Reserve now owns on its balance sheet $2.6 trillion in mortgages. That means about 24% of all outstanding residential mortgages in this whole big country reside in the central bank, which has thereby earned the remarkable status of becoming by far the largest savings and loan institution in the world.
Runaway house price inflation continues to characterize the U.S. market. House prices across the country rose 15.8% on average in October 2021 from the year before. U.S. house prices are far over their 2006 Bubble peak, and remain over the Bubble peak even after adjustment for consumer price inflation. They will keep on rising at the annual rate of 14–16% for the rest of 2021, according to the AEI Housing Center.
Unbelievably, in this situation the Federal Reserve keeps on buying mortgages. It buys a lot of them and continues to be the price-setting marginal buyer or Big Bid in the mortgage market, expanding its mortgage portfolio with one hand, and printing money with the other. It should have stopped before now, but the purchases, financed by newly created fiat money, or monetization, go on. They proceed at the rate of tens of billions of dollars a month, stoking the house price inflation, making it harder and harder for new families to afford a house. A recent Wall Street Journal opinion piece was entitled “How the Fed Rigs the Bond Market”—it rigs the mortgage market, too.
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