Ok, this is a big deal for homeowners and home buyers AND the National Housing Market!
Remember back in June when mortgage interest rates jumped from mid 3% to 4.5% within 2 weeks. That totally unpredictable jump was greatly a result of the prediction that the Federal Reserve will NOT , . do what they did today. And that 1% jump in interest rates scared many potential homebuyers and resulted in a slowing of the housing market as indicated by August numbers.
Now, the Federal Reserve’s decision to continue stimulus will result in a lowering of interest rates and LIKELY stimulate the home purchase market! This should be excellent news for the Real Estate Industry.
Tell me what you think…
Fed announces major new stimulus in bid to lower unemployment
Jane C. Timm, @janestreet
3:06 PM on 12/12/2012
In a surprise move designed to give the economy a jolt, the Federal Reserve will tie its monetary policy to the nation’s unemployment rate.
Ben Bernanke and co. announced Wednesday they’ll tie the Fed’s bond-purchasing program to the national jobless rate—purchasing $85 billion Treasury securities and mortgage-backed securities a month until unemployment falls below 6.5 percent or inflation rises to 2.5%. Last month, unemployment fell to 7.7 percent.
Morning Joe economic analyst Steve Rattner, a former Treasury adviser to President Barack Obama, said the move is “unprecedented.”
The Fed will not allow inflation rates to rise above 2.5%, the announcement said, allowing for the first time that they would allow inflation to rise above 2%, even slightly, in order to reach their economic goals.
This move “should make monetary policy more transparent and predictable to the public,” Bernanke told reporters, adding that he believes the program would continue to keep interest rates artificially low until 2015.
“This is likely to mean low interest rates for a long time,” Rattner said.
The Reserve “will now buy Treasuries outright – previously it has been selling shorter maturity Treasuries and buying longer maturity ones,” Rattner explained. “This amounts to printing money to stimulate the economy, and finance our deficit.”
“All in all, this is a big, bold and correct move by the Fed,” Rattner added. “Another example of good policy from a critically important institution.”
