As you may know, the fed has been buying mortgage backed securities to
keep rates low to stimulate a housing market recovery. With the depth
of that recovery debatable, is now a good time for the fed to pull out?
The simple answer is yes. The fed currently has about $89 billion left
to spend from its original $1.25 trillion. This would allow the fed to
purchase close to $2 billion a day in mortgage backed securities through
the end of Q1 2010. This figure is lower than the $3 billion a day in
purchases made in mid January but should be sufficient due to the
seasonal adjustment in mortgages produced. This purchase amount should
keep rates near historic lows throughout the Q1.
At the end of Q1, rates will start to increase but that should coincide
perfectly with the increased demand of new home purchase requests which
typically happens in Q2. The fed will then be allowed to exit just as
demand rises which should keep pricing stable. The stability of price
coupled with the exit of fed intervention should then lead to more
confidence in the housing market overall.
For more details NEWS!!! Mortgage News Daily.
Opinion by Paul Nelson
Source Mortgage News Daily







