Fed economic plan could lower mortgage rates

Fed economic plan could lower mortgage rates

WASHINGTON – Sept. 14, 2012 – In a bold effort to reduce borrowing costs for homebuyers and bolster the recovery, the Federal Reserve says it will buy mortgage-backed securities until job growth picks up significantly.

Thursday’s announcement marks the first time the Fed has committed to an open-ended plan to buy government bonds until the economy improves. Economists say that can have more powerful effects than the Fed’s previous $2.3 trillion in Treasury and mortgage bond purchases.

Investors cheered, pushing stock markets to their highest levels in at least five years.

The Fed agreed to buy $40 billion a month in mortgage-backed securities. It also extended its likely timetable for keeping short-term interests near zero from late 2014 to mid-2015.

“We don’t have tools strong enough to solve” high unemployment, Fed Chairman Ben Bernanke said. “We’re just trying to get the economy moving in the right direction.”

Along with an existing Treasury bond-buying program ending in December, the Fed plans to purchase $85 billion a month in long-term bonds through year’s end. That should lower long-term rates and make loans less costly for consumers and businesses.

The Fed said it will continue buying mortgage bonds and may buy other assets if “the labor market doesn’t improve substantially.” It vowed to keep its easy-money policies going even after the recovery strengthens.

“It’s a bold move,” says economist Michael Gapen of Barclays Capital.

He predicts it will bring down mortgage rates by up to a half-percentage point and add two tenths of a percentage point to economic growth over the next year. Unemployment should fall by another two-tenths of a percentage point, says Mark Zandi, chief economist of Moody’s Analytics.

The Fed slightly cut its 2012 forecast, projecting the economy will grow at a 1.7 percent to 2 percent annual rate. It expects unemployment, now 8.1 percent, to dip to 7.6 percent to 7.9 percent by the end of 2013.

With interest rates low and banks tight-fisted, the benefits of the Fed’s plan may be limited. Almost two-thirds of the 40 economists that USA TODAY surveyed after the announcement said the Fed’s actions would help the economy only a little by January. As many said the impact on the housing market would be as slight.

© Copyright 2012 USA TODAY, a division of Gannett Co. Inc., Paul Davidson

Thought You'd be Interested

Thought You'd be Interested

Coldwell Banker announces the top Agents

Coldwell Banker Residential Real Estate has just announced the top agents as of August 2012 and once again Hughes Shelton Realtors are the number one agents in Hillsborough County Florida.

More good news for Tampa Bay real estate

Home sales have risen 13 percent to 3,000 in Hillsborough, Pinellas, Pasco and Hernando counties since August of last year, according to data from My Florida Regional Multiple Listing Service, as reported by the Tampa Bay Times.
What’s more, homes are selling for more money and they are selling in less time. Conventional sales and short sales of homes at deep discounts each climbed 25 percent in the past year. Conventional homes sold for an average of $170,000, and short sale homes sold for an average of $107,000.
During the past year, sales of foreclosed homes contributed less to the area’s real estate picture, dipping 20 percent to just over 500 homes sold. Agents report that foreclosed homes in good condition are now rare and are selling fast.
Overall, inventory has dropped substantially, falling to just three-months’ supply of homes in Hillsborough County

Number of Improving Housing Markets Grows

Daily Real Estate News | Tuesday, September 11, 2012

The number of metro areas showing signs of real estate market improvement expand in September, rising from 80 to 99 metro areas, according to the National Association of Home Builders/First American Improving Markets Index.
"This solid growth is an encouraging sign that housing continues on a slow but steady recovery path that is gradually advancing from one local market to the next," says Barry Rutenberg, chairman of the National Association of Home Builders.
The index identifies metro areas that have shown improvement in housing permits, employment, and home prices for at least six consecutive months. This month, the markets added to the list include Tucson, Ariz., Jacksonville, Fla., Springfield, Ill., Greenville, N.C., and Bend, Ore., among others.
"More metros across the country are experiencing a sustained uptick in house prices, employment, and new building activity as rising consumer confidence in local market conditions pushes more people to consider a new-home purchase," says NAHB Chief Economist David Crowe.
Download and view a complete list of the 99 metro areas that made the Improving Market list, visit www.nahb.org/imi (Excel).
Source: National Association of Home Builders

Another Sign That Home Prices Have Hit Bottom.

Daily Real Estate News | Monday, September 10, 2012

Economists are increasingly confident that home prices have bottomed out.
For the last three years, home prices have usually risen in the spring and summer to only then lose all of those increases—plus more—in the fall and winter months. However, economists expect this year to be different and do not foresee such a big drop to occur to home prices in the colder months ahead, The Wall Street Journal reports.
While the fall months likely will bring out some sort of decrease in recent home price increases, “we have a much better supply and demand dynamic” than in previous years, Mark Fleming, CoreLogic’s chief economist, told The Wall Street Journal.
Home prices have posted some of their largest year-over-year jumps compared to the last six years. According to CoreLogic, home prices have risen 9.6 percent from February, which was the month prices reached their lowest levels since the housing slowdown. Economists say it’s unlikely that, given recent indicators, home prices will reverse course steeply and fall 9.6 percent or even more in the coming months. Home prices haven’t dropped by that type of percentage since the economy was in a recession.
Source: “Here’s More Evidence That Home Prices Have Hit Bottom,” The Wall Street Journal (Sept. 4, 2012)

U.S. homes prices post first 12-month gain since 2010

U.S. home prices post first 12-month gain since ‘10

WASHINGTON (AP) – Aug. 28, 2012 – U.S. home prices rose in June from the same month last year, the first year-over-year increase since the summer of 2010. The increase is the latest evidence of a nascent recovery in the housing market.

The Standard & Poor’s/Case-Shiller home price index released Tuesday showed a gain of 0.5 percent from June 2011.

The last time the year-over-year index increased was in September 2010. For much of that 12-month period, the government was offering a home-buying tax credit.

The report also showed that all 20 cities tracked by the index rose in June from May, the second consecutive time in which every city posted month-over-month gains. And all but two cities posted stronger gains in June than May.

Detroit, Minneapolis, Chicago and Atlanta recorded the biggest one-month gains.

“The combined positive news coming from both monthly and annual rates of change in home prices bode well for the housing market,” said David Blitzer, chairman of the S&P’s index committee.

Jonathan Basile, an economist with Credit Suisse, said improving home prices should boost home sales further in the coming months.

“Persistent news of rising house prices should start convincing prospective home sellers that it’s not just a buyers’ market,” Basile said. “And when Americans become more comfortable with selling their home, they also become more comfortable with buying another one.”

The S&P/Case-Shiller monthly index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The June figures are the latest available.

The increases partly reflect the impact of seasonal buying. The month-to-month prices aren’t adjusted for seasonal factors.

Still, a measure of national prices rose for the third straight month. Home prices jumped nearly 7 percent in the April-June quarter compared to the previous quarter.

The housing market is making a modest but steady recovery in part because homes are more affordable: Mortgage rates have fallen to near-record lows. Housing prices are about one-third lower than at the peak of the housing bubble in 2006. Those trends have helped lift sales of both new and previously occupied homes.

Sales of previously occupied homes increased in July from June, the National Association of Realtors said last week. Sales have jumped 10 percent in the past year.

Builders are growing more confident after seeing more traffic from potential buyers. Last month they applied for the largest number of building permits in nearly four years.

The housing market has a long way to go to reach a full recovery. Some economists forecast that sales of previously occupied homes will rise 8 percent this year to about 4.6 million. That’s still well below the 5.5 million annual sales pace that is considered healthy.

Sales have been held back by a low supply of homes on the market and tight credit standards, economists said. Many would-be buyers are having trouble qualifying for loans or can’t afford larger down payments being required by banks. A Federal Reserve report last month showed that many banks tightened their mortgage credit standards this summer.

Still, the housing market is steadily improving and is poised to contribute to economic growth this year. Modest economic growth and job gains are encouraging more Americans to buy homes.
Copyright © 2012 The Associated Press, Martin Crutsinger, AP economics writer