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Bouncing back: five years on from Fannie and Freddie
With US real house prices rising since spring 2012, they have provided a strong force for a growth-recovery that, encouragingly, both has legs and is being led by the private sector. Ex-government, US GDP is growing 2.5% year-on-year, versus 1.6% year-on-year with government. US GDP now stands 4.5% up in real terms from its pre-crisis peak – outperforming the euro-zone and UK, which are still 2-3.25% down on their pre-crisis levels.
With this in mind, the Federal Reserve now needs to tread carefully when tapering its asset purchases, probably from the September 18 Federal Open Market Committee decision. Average mortgage rates have risen about 80bp on the back of Bernanke's 'taper-gate' warning in May, and any subsequent hit to the housing recovery would be an unintended consequence.
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