The real estate market in the USA is really hot right now. It boils more violently than on the eve of the bursting of the great real estate bubble in 2008. The fingers point to the US Federal Reserve. With its ultra-loose monetary policy, which was intended to support the economy and markets during the pandemic, the Fed not only contributed to inflation at a forty-year high and drove the stock markets into unprecedented spheres. It has also brought about historically low mortgage rates by en masse buying up mortgage-backed securities (MBS).
More than ten years ago, opaque securitized MBS distributed all over the world triggered the great global financial crisis after the real estate bubble burst at the time. After that, the regulation of these investments was decidedly improved, but MBS still exist, some are highly complex, and again nobody knows how they will actually react if US mortgage holders are no longer able to pay their installments due to rising interest rates and the underlying homes abruptly depreciate.
But maybe we will know soon. The Fed is tightening monetary policy, and mortgage rates have already risen noticeably. Should the current housing bubble burst, trillions of dollars could be wiped out, at least in the US. That could then also put an end to the bubble on the stock market, which some experts are also warning about. The Fed will probably step into the breach again, but investors are advised to have a strategy ready in case of an emergency.
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