Without a doubt, the U.S. housing market has been the most successful sector of the economy this year, and Wednesday’s Case-Shiller home price index report – which showed a fifth consecutive month of year-over-year increases in home prices nationwide – was a late Christmas present for homeowners across the country. The housing market “bottom” was one of the biggest business stories of 2012. But with all this enthusiasm for the housing market recovery, it’s important to take a step back and think about the real driving force behind rising home prices. Jonathan Miller of Miller Samuel, Inc., asks the question of how home prices can rise in an environment where unemployment remains high, there is little growth in take-home pay, taxes seem poised to rise and lending standards continue to be tight. One of the answers to this riddle, according to Miller, is the Federal Reserve. Record low mortgage rates, primarily (though not exclusively) due to the Fed’s decision to buy up mortgage-backed securities, have done much to boost home prices. [Read this article]
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