The Precarious Peak

How the Fed Engineered a Housing Crisis

Homeownership used to be the cornerstone of the American Dream. Today, it’s looking more like a fantasy for millions. The culprit? A well-intentioned but disastrous sequence of Federal Reserve policies that flooded the housing market with cheap money and artificial demand—sending prices into the stratosphere.

Let’s be clear: home prices are no longer climbing based on fundamentals like wage growth or household formation. Instead, they’ve become the product of monetary manipulation. And we’re now at a point where the foundation beneath this price pyramid is looking dangerously unstable.

1. The Fed’s Role in Lighting the Fuse

In an effort to “stimulate” the economy post-2008, the Fed began slashing interest rates and buying mortgage-backed securities (MBS). This kept mortgage rates historically low—even under 3% in 2020. Sounds good, right? But here's the kicker:

• Cheap mortgages sent demand soaring.

• Builders couldn’t keep up.

• Investors began bidding up prices.

• Housing became a speculative asset rather than a shelter.

Result: Prices doubled in many U.S. metros between 2012 and 2022.

2. Affordability: A Downward Spiral

According to the Atlanta Fed, housing affordability has plummeted nearly 45% since 2012. Today, the average monthly mortgage payment is more than double what it was just four years ago—even though wage growth has barely kept pace with inflation.

🔍 Example: In 2019, a buyer could afford a $400,000 home with $1,700/month. In 2025, that same payment barely qualifies for a $275,000 home.

3. The Hidden Cost of “Stimulus”

The Fed didn’t just lower rates—they bought trillions in MBS, inflating demand without expanding supply. That’s how we ended up here:

• Homeownership is now lower than it was 20 years ago.

• Rents are up 30–50% in most U.S. cities.

• First-time buyers are locked out—especially younger Americans.

In short, the housing market is being supported by policies that only work until they don’t.

4. Investor Frenzy and Institutional Buying

When Wall Street realized they could borrow at near-zero rates and earn 5–7% yields on rentals, they jumped in. Firms like BlackRock and Invitation Homes began buying entire neighborhoods, squeezing inventory and making it even harder for individuals to compete.

This “financialization” of housing turned homes into yield-bearing instruments—distorting the entire purpose of ownership.

5. The Bubble Is Looking Tired

There’s a growing chorus warning that we’re near the top of this artificial boom. Why?

• Mortgage applications are falling.

• Inventory is slowly creeping up.

• Homebuyer confidence has dropped to its lowest in a decade.

When interest rates tick up—even slightly—the entire house of cards begins to wobble. And the Fed, holding trillions in MBS, is still reluctant to offload those assets for fear of causing market chaos.

6. The Moral Hazard

By endlessly supporting asset prices, the Fed has created a system where risk is socialized and rewards are privatized. The winners? Large institutions. The losers? Working Americans and younger generations.

And yet, despite this, there’s no clear off-ramp. The Fed can’t raise rates significantly without pricking the bubble—and it can’t keep rates low forever without stoking more inflation.

7. Why This Is Dangerous—Now

We are not just in an overpriced housing market. We are in a monetarily induced distortion where prices bear little resemblance to what people can truly afford. And when the correction comes, it won’t be soft. It will be systemic.

If you're a homeowner, it’s time to assess your equity exposure.
If you're a buyer, it’s time to be patient.
If you're an investor, it’s time to consider what happens when gravity reasserts itself.