Fed has limited tools to work with
Fed wants to work towards its goal of maximum employment and price stability
Fed wants to work towards those goals through the housing market
Fed is going to buy mortgage backed securities
Fed is going to keep low mortgage rates low
Fed hopes this will increase home prices
Fed hopes increased home prices will increase home loans and home building and more jobs in the housing market
If they want to spur employment in housing, they are going to have to make home loans more available. Just keeping our already low rates low may help home prices, may help existing home owners, may help financial institutions REO inventory, but how does it help the bulk of new home buyers? Seems to me the things they are struggling with are the down payment and credit score requirements to qualify for a new home loan. But hey, that’s just me and my observations.
The truth is that the Fed really does have very limited tools to work with towards achieving their maximum employment goal. Let’s face it. If low rates were all that were needed we would already be there.
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury