New Mortgage Buying Program to Spur Market

 There was some news for the housing market this week, both here in the Bay Area and nationally. The biggest headlines came on Thursday when the Federal Reserve, as expected, announced plans for further stimulus for the sluggish economy. And here at home, the local housing market continued to gain strength with luxury home sales improving once again last month (more on that later).

 The Fed surprised no one when it said it plans more economic stimulus. But what did take some by surprise was the approach Chairman Ben Bernanke and fellow governors chose. With its new quantitative easing, or QE3 effort, the Fed said it plans to begin an open-ended program to purchase mortgage-backed securities – a move aimed at bolstering the housing recovery and the overall economy as well.

 The Fed will buy $40 billion of mortgage debt each month until job growth picks up, a move that was greeted with enthusiasm by the financial markets Thursday with the Dow rallying 206 points. In a statement released Thursday, the Fed’s Open Market Committee acknowledged concern that without “further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.” Here’s a link to the Fed’s news release: http://www.federalreserve.gov/newsevents/press/monetary/20120913a.htm.

 The Fed was widely expected to act at this week’s meeting in light of a weak jobs report and continued anemic GDP growth in the economy. While the mortgage-buying program in itself certainly is no panacea for the housing market or the economy, it can only help real estate sales across the country by making it even more affordable for potential buyers to jump into the market.

 

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