The Federal Reserve announced Thursday that, in an effort to re-ignite economic recovery, it was taking aim at mortgage rates — a move that will likely take rates even lower from their current record lows.

The Federal Reserve announced it will purchase $40 billion of mortgage-backed securities that will help boost the recovery in the housing market. What’s more, the central bank said that it will continue with the purchase program until the economy shows greater improvement, particularly with unemployment.

"These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," according to the Fed in a public statement.

The Fed says the economy still has a long way to go toward recovery. The Fed predicts the jobless rate will stay above 7 percent well into 2014 and that economic growth will remain slow in the coming months.

At its Thursday meeting, the Fed left its funds rate unchanged at near-zero, but announced the rate — which has a bearing on mortgages — would remain at "exceptionally low levels" until at least mid-2015.

As mortgage rates sink lower, home shoppers have been taking advantage. The Mortgage Bankers Association announced this week that mortgage applications for home purchases were up 8.1 percent for the week ending Sept. 7. Mortgage applications for purchases also were up 7 percent from year-ago levels, MBA said.

"While low interest rates impose some costs, Americans will ultimately benefit most from the healthy and growing economy that low interest rates promote," Fed Chairman Ben Bernanke said Thursday following the Fed committee’s meeting.

Source: “Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates,” CNBC (Sept. 13, 2012)

The Federal Reserve’s periodic survey of economic conditions, known as the Beige Book, this week reported growth in all 12 regions for the first time since 2007.

Here’s what the Beige Book had to say about real estate:

Boston. Commercial real estate leasing was flat in some areas and noticeably improved in others.

New York. Commercial real estate leasing has picked up noticeably although vacancy rates continue to rise in some areas. Residential rents appear to have bottomed.

Richmond. Residential real estate markets are improving with the inventory of homes in the Washington, D.C., suburbs falling to its lowest level in 18 months.

St. Louis. Commercial and industrial real estate activity remaina slow, but the suburban office vacancy rate increased in Little Rock; Louisville, KY; and Memphis. It was flat in St. Louis.

Minneapolis. Home construction is rebounding with building permits in the Minneapolis-St. Paul area doublinf year-over-year in May. Vacant commercial real estate increased in Minneapolis.

Kansas City, Mo. Home sales rose, but practitioners are less optimistic about upcoming months.

Dallas. Housing demand has improved, but bankers say many potential borrowers are being turned away because of poor credit.

Source: Associated Press, Christopher S. Rugaber (06/09/2010) http://www.realtor.org/RMODaily.nsf/pages/News2010061001?OpenDocument

The near-record low mortgage rates seen during the past few weeks may not be around much longer.

Signs of improving economic conditions could lead Federal Reserve Chair Ben Bernanke to raise key interest rates, driving up mortgage rates, says Stephen Stanley, chief economist at Pierpont Securities LLC.

The evidence includes more consumers are paying their bills on time. Past-due accounts at American Express declined 34 percent compared to a year ago, and Target Corp. reported its lowest delinquency rate in two years during the second quarter.

In another sign of economic improvement, fewer banks reported tightening lending standards this month, one reason consumer borrowing rose for the second time in three months.

“If lending standards start to stabilize, that’ll be another reason to remove the emergency measures, including the zero rate,” says Jay Bryson, a senior global economist at Wells Fargo Securities LLC in Charlotte, N.C., who formerly worked at the Fed in Washington.

Source: Bloomberg, Bob Willis and Anthony Feld (05/28/2010) http://www.realtor.org/RMODaily.nsf/pages/News2010052801?OpenDocument

With the housing recovery still fragile, it’s hard to look ahead with anything but caution. However, the long-term prospects for the market are “incredible,” FHA Commissioner David Stevens told REALTORS® yesterday in the opening forum of the 2010 NAR Midyear Legislative Meetings & Trade Expo.

Young households today represent a demographic block larger than even the baby boomers, and their entry into the housing market promises to help build “an incredible real estate market in the future,” said Stevens. But first the housing market must move from recovery to stability and then to long-term growth, and that will only happen if investors regain confidence in the mortgage market. And for that to happen, the mortgage market must be reformed to reward transparent financing structures.

Stevens credited NAR’s role in helping Congress and the administration stabilize the market through its support of a “mosaic” of pragmatic policies, such as:

• The Federal Reserve’s $1.25 trillion dollar investment in Fannie Mae and Freddie Mac mortgage backed securities, which helped keep interest rates historically low.
• The home buyer tax credit, which has so far been taken by 2.2 million households for $16 billion in total returns
• The federal government’s foreclosure prevention efforts, which have helped 1.1 million households.

That mix of programs has led to today’s housing recovery but the job won’t be finished, he says, until the federal government steps out of the picture and the market stands on its own. “We constantly talk about exit strategy,” Stevens said, referring to the administration’s goal of unwinding its mortgage-market interventions.

To help protect the recovery, Stevens urged REALTORS® while they’re in Washington this week to convince lawmakers to pass FHA reform legislation under consideration in the House as soon as possible. That legislation, H.R. 5072, would enable FHA to lower the upfront mortgage insurance premium and instead fold a higher annual premium into the loan, a change that would align FHA with the approach used in the private sector. The legislation would also give FHA more tools for clamping down on bad lenders.

The changes in the mortgage insurance premium are needed to help FHA improve its financial picture and restore its reserves to its congressionally mandated level. Not having the authority it needs to change its premium structure “is costing FHA $300 million a month in money it’s not getting,” he said.

“You are the recovery,” he told the packed room of REALTORS®. “Now we’ve got to finish the job.”

Source: http://speakingofrealestate.blogs.realtor.org/2010/05/12/stevens-%e2%80%9cincredible%e2%80%9d-market-ahead/

Investors breathed a sigh of relief Wednesday when Federal Reserve Chair Ben Bernanke told Congress that interest rates are likely to remain low for an extended period. The economy, he said, "still requires support for recovery."

Investors see these low rates as a boon to a recovery of employment and business.

Bernanke’s announcement also took the edge off the news Wednesday that housing sales hit a new low in January.

"Even though nothing he said was particularly new, it was just enough to calm the ruffled feathers that were out there," said Jim McDonald, chief investment strategist at Northern Trust in Chicago.

Source: The Associated Press, Tim Paradis (02/24/2010)

http://www.realtor.org/RMODaily.nsf/pages/News2010022501?OpenDocument

Federal Reserve Chair Ben Bernanke said on Friday that he was optimistic the economy is about to take off.

Bernanke acknowledged that credit is still tight, especially for businesses, but he told an audience of bankers, academics, and economists that the worst is over.

"Although we have avoided the worst, difficult challenges still lie ahead," Bernanke said. "We must work together to build on the gains already made to secure a sustained economic recovery."

Bernanke called for stronger regulation of financial rules "to ensure that the enormous costs of the past two years will not be borne again."

Source: The Associated Press, Jeannine Aversa (08/21/2009)

Source: http://www.realtor.org/RMODaily.nsf/pages/News2009082403?OpenDocument