Fed Wants to Bet the House, Again .

[Dover]

A 4% mortgage rate hasn't revived housing. Perhaps it needs to fall to 3.5%. Or maybe 3% will do the trick.

In recent days, Federal Reserve officials have raised the possibility that they may need to again buy mortgage bonds, as they did in 2009. In theory, that should cause mortgage rates to fall further, bringing more buyers into the market and spurring additional refinancing that frees up consumer-spending power.

But it might not work as well in practice. High unemployment and overstretched consumer balance sheets have kept housing in the doldrums even with record low rates. And for many existing homeowners, fees and lending criteria, not interest rates, are the main refinancing issue. Even Fed Governor Dan Tarullo acknowledged that hurdle in a speech this week on the Fed buying mortgage bonds.

Plus, the Fed might find it tougher this time around to move mortgage rates significantly lower...cont'd

http://online.wsj.com/article/SB10001424052970204618704576645364274307434.html?mod=markets_newsreel

[Tippy]

1. K&R IT didn't work before what makes them think it will now.

People have no money.....most who are still hanging on are not spending....They sure as hell won't buy a house....The stupidity of the Fed is unreal....

[sendero]

7. I'm not so sure..

... that the stated goal of the Fed (to goose housing) is their real goal. Their real goal is still to somehow save the big banks.

[abelenkpe]

2. Their theories ignore the fact that home prices are not in line

With salaries and that those employed are not secure in their jobs. People don't need inexpensive loans. They need affordable housing and secure well paying jobs.

[customerserviceguy]

3. They also need to believe

that home prices have stopped falling. Sorry to say it, because a lot of folks here don't like it, but that doesn't happen until the big backlog of foreclosure properties becomes exhausted.

Maybe with rising employment, that backlog will disappear quickly, like it did in previous recessions, but this backlog is way bigger than any I've ever seen.

[Peter1x9]

4. Not only that, but even as home prices fall,

property tax rates (in some areas) are on the rise. In my area (NE Illinois and SE Wisconsin), the rates are outright extortion. A lot of the property ads I've been seeing lately include "seller is very motivated", then I look at the taxes and know why. I routinely see houses here priced at 100k with 6000/year in property taxes, and we're not even near Chicago. For a 100k house in the city, the taxes around 8500/year now.

If we were to buy in my area right now, we would be paying $400-500/month just in property taxes.

[truedelphi]

5. Very good point. Which is why the first thing that

Should have happened, back during the 2008 Economic Crisis, is for Congress to have handled the situation the same way that Congress handled the S & L failures - create chartered state banks, loan the 1.2 Trillion to fourteen trillions of buck to the state chartered banks and enforce the requirements that those entities loan out the monies to the local community.

And in fact, you' re not really creating banks, you are just seeing that already existing banks are chartered.

And then again (using the same pool of money 1.2 trillion to fourteen trillion mentioned above) instead of letting Bernanke "loan" the secret monies he gave to the largest firms, have the money be loaned to the states directly. This way, the many state and county employees who have been laid off would still be employed. They would be paying sales tax when they shopped, the businesses they visit would be paying taxes, etc.

[n2doc]

6. They can make it 0%, it won't revive the market

Since good paying, stable jobs are very hard to come by, people simply aren't going to take on a big liability like housing.

Besides, this last round it got below 4 for a while. Didn't seem to do much.

[AnneD]

8. ITA....

I thought I had a secure job in education until I was riffed. THey rehired me but what do you think that does for my confidence. Besides, homes are still overpriced as to what I can afford. I am sitting on the side lines saving cash. Hopefully I will eventually get a house, but I am in no hurry to go into debt.