New Federal Reserve Stimulus Includes Housing
The Federal Reserve announced they are offering a round of monetary policy stimulus. The policy will include a cut in the federal funds rate to a top rate of 0.25%, lowered discount rate from 1.25% to 0.25% will ensure liquidity for depository institutions, a round of quantitative easing was enacted to include purchases of $200 billion of mortgage-backed securities (MBS) and $500 billion of Treasuries and a cut in the reserve requirement for a large number of banks to zero to ensure liquidity. The policy change will hopefully encourage economic growth and labor market conditions.
What does this mean for the housing market? There will be a purchase of $200 billion of mortgage-backed securities which will help with investor ability to purchase MBS. In turn, this should ensure the mortgage rates stay stabilized for the short term. The Federal Reserve will also increase its holdings of Treasury securities by at least $500 billion to allow more flow for credit to households.
The National Association of Home Builders will continue to collect data on the current status of the housing market and the building industry.
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