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Description: Fed plans to stop mortgage purchases (and resultant rate suppression) in March, but could be thwarted by "nightmare scenario" compromising their independence
URL: http://www.bloomberg.com/apps/news?pid=20601087&sid=aVCMmIqrxkKs&pos=6
Info/Broken?: http://www.bostonbubble.com/link_info.php?id=2657

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[john p]

If the natural mortgage rate should be around 6.5% and the FED's interaction is holding it at 5%:

If you look at the affordability "reach height" or what the current crop of buyers at the median house price are able to afford for a monthly payment:

If rates go back up to 6.5%, house prices would have to drop 7% in order to achieve the same monthly payment as what it would be today at a mortgage rate of 5%.

So the FED is propping up homes 7%; wait, oh shit, I forgot, you have to add in for the $8k first time buyer tax credit thing.... So taking a quick swag at that, what the FED is propping up house prices 10% in total?

If you want to go even further, in doing this current strategy, he's putting enormous elastic strain to not just go back to 6.5, but if we get a major debasement of the US Dollar, rates could rise into double digits, right?

If the Economy tanks further you have more casualties piling up and more people that can't refinance and get out from being upside down and more families losing their homes due to job losses.

The FED is got everyone playing a guessing game : Inflation or Deflation when what we've really got is Stagflation. The Cost-Push of the cost of government and with the devalued dollar, the price of oil the only thing I see pulling us out of this is exports, so I guess I need to do some research to figure out the benefit of this...

[Renting in Mass]

No way does the Fed stop purchasing mortgages in March. Not gonna happen.

Asking Bernanke if he's going to stop the purchases in March is essentially asking him if the housing market will have recovered in March. Of course he's going to say yes. He has to say yes.

[balor123]

I don't like it but - agreed.