Even after several years of them, monetary policymakers continued to tread carefully with large scale asset purchases (LSAP). Otherwise known as quantitative easing (QE), in the US they were first announced all the way back in the darkest days of global financial panic in 2008. Yet, in 2012 and 2013 concerns remained that they could prove too powerful.

Then-Richmond Fed President Jeffrey Lacker voted against QE3 in September 2012. He had also dissented that June, being opposed to the far more modest extension of Operation Twist. When pressed as to why he might resist the majority sentiment of Twist, which wasn’t all that much of an operation in relative comparison, Lacker explained:

I do not believe that further monetary stimulus would make a substantial difference for economic growth and employment without increasing inflation by more than would be desirable.

In other words, he felt the central bank might risk being too accommodative with just Twist, let alone a third (and fourth) round of outright QE and balance sheet expansion. He was not alone in thinking there were considerable risks harmful inflation might be unleashed that could undo all the good they intended to do (and then some).

Obviously, what the Fed purchased during any one of its four LSAP’s mattered. There were just two varieties (unlike those in Europe and Japan), US Treasuries and MBS. The first, UST’s, was intended to stir the economy through several channels by virtue of those bond rates being considered risk-free. The second, MBS, was more directly meant to stimulate via the housing sector.

Did it?

The evidence is most charitably mixed. There was especially in 2012 and 2013 an almost reborn euphoria in real estate, but only in the multi-family and rental pieces. An apartment boom was created and you have to believe that QE2 in particular played a substantial role in driving at least expectations among homebuilders (it gets far more complicated trying to untangle the effects of MBS purchases on the complex mess of mortgage and real estate wholesale finance).

By 2015, however, the pace of construction slowed dramatically and then spent several years contracting. The Fed ended QE3 (the MBS brother to QE4’s UST’s begun separately in December 2012) in December 2014. Even if you are predisposed, like Lacker, to believing in the powerful positive effects of QE, that’s a negative result. In other words, even if QE was responsible for the apartment boom had it worked well enough the boom would have continued on without additional QE.

If there is a boom only while you are buying up MBS, then you aren’t stimulating at all you are making a mess.

Though it seems more reasonable the downtrend owed to “global turmoil” and the market and economic upset to the “rising dollar”, the slowdown and contraction in multi-family construction was in some good part due to reconsideration of that 2011-14 period. Perhaps more apartments were built (as well as previously foreclosed houses converted to rental units by leveraged investment companies) than was required by fundamental supply and demand?

Whatever may have been the case, revised estimates for permits and starts through March 2018 suggest that apartment construction may be making a comeback. It’s not a huge trend as yet, and these are only initial indications, but for the first time in several years there may be some positive momentum building.

At the same time, however, the single-family segment might be further tailing off. Total single-family permits declined year-over-year in March 2018 for the first time since 2016. The monthly data is noisy and is often subject to large revisions (like those for February 2018), but the softness in single-family projects isn’t just the one month.

It also extends into resales. According to the National Association of Realtors (NAR), existing home sale have hit a ceiling dating back to early 2017. Taking account of the ups and downs related to hurricanes Harvey and Irma last year, overall resale activity appears to have turned lower after March last year. That’s an entire year stuck around 5.5mm to 5.6mm (SAAR).

A lot of that weakness has been blamed on lack of available-for-sale inventory, and there is some truth to that. Inventory levels have experienced a substantial and sustained decline. That downtrend, however, didn’t begin in March 2017 but more than two years before.

Like the inflection in multi-family construction, our attention is drawn to the “rising dollar” rather than QE’s full tapering and termination. Altogether, then, it might seem as if the latest stimulation for apartment construction is counterintuitively continued economic weakness and uncertainty. Again, these are only the outlines of a possible shifting trend(s), but it does seem as if the real estate market has become something of a zero-sum game.

Overall construction activity continues at a pace only partially recovered from the devastation of the housing bust. Even today, it remains at levels (adjusted for the population) associated with only the worst historical climates. If there is a pickup in apartment building it is at the margins coming at the expense of single-family units.

The NAR’s data, particularly for inventories, gives us a sense that this is widespread as well as the reasons for it.

To evaluate the Federal Reserve’s LSAP’s then, we have to take these conditions into account. The System still holds $1.7 trillion in mortgage-backed securities, about the same level as it had obtained under the last of QE3’s purchases in 2014. To have left the real estate market in this state is pretty clear evidence it didn’t work. It certainly was nowhere near as potent as Jeffrey Lacker had feared in his widely shared concerns about how central banks risked being “too powerful” (there are also lessons here about the difference between effective money and savings that apply when analyzing the possible causes of the stock bubble, too).

What we are left with is the usual “jobs saved” nonsense; that housing as the whole economy would have been worse without the LSAP’s. I don’t see how that can be the case because it’s already March 2018 (in terms of data) and it is worse. Much worse. Time factors here more than any possible temporary positives.

Ultimately, the issue is economy. The housing channel turned out to be a clear dead-end for monetary “stimulus” where the size of intervention didn’t matter ($1.7 trillion). There may have been more related effects in the earliest parts of the program, but they proved to be small and at most fleeting. As to the other channel, UST’s, the results are even less ambiguous (and not just term premiums).

The economy shrunk, and then stayed shrunk. The first part evaluates the Federal Reserve in its pre-crisis and crisis states; the second during the “recovery.” Housing was supposed to be a primary part of it; unfortunately it was.