Fed's Mortgage Manipulation Creates Unaffordable Housing Market
The Federal Reserve's manipulation of mortgage and housing markets has led to unaffordable house prices for many American households. The issue dates back to 2008 when, under Chairman Ben Bernanke, the Fed started buying mortgage-backed securities (MBS) in an attempt to drive down interest rates and pump up house prices.
This unprecedented gamble was meant to be temporary, but it has continued for over 18 years with the Fed still owning MBS worth $1.9 trillion. The goal was to suppress mortgage interest rates to abnormally low levels, thereby inflating house prices.
The result is a second housing price bubble in the first quarter of the 21st century, with national average house prices now far above the peak of the first bubble. Adjusted for inflation, house prices are 10 percent higher than the previous bubble peak, and informed estimates suggest they are about 30 percent higher than their long-term trend.
The Fed's actions have rendered inflated prices unaffordable for many Americans. According to the National Association of Realtors, the median price for existing home sales in July 2026 was $431,400. To put this into perspective, a ranch house from 1955 cost just $7,900 and had monthly payments of only $49.74.