Fed?s Buying Loses Steam as Mortgage Rates Rise: Chart of Day
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By Kathleen M. Howley
June 12 (Bloomberg) -- The Federal Reserve?s mortgage- buying program to bolster housing demand by lowering fixed interest rates is losing effectiveness at a time of the year when sales of U.S. real estate traditionally peak.
The CHART OF THE DAY shows the Fed?s influence on rates has waned over the course of bond buying that more than doubled purchases in three weeks or less. The first effort, in March, drove rates to a record low. After the last, they rose to a 2009 high. The figures shown exclude sales of bonds.
?The government played chicken with the bond market and it lost,? said Randy Johnson, president of Newport Beach, California-based Independence Mortgage Co. ?If they were able to keep it up long enough, the housing market would heal and the rest on the economy could start its recovery. What has happened, however, is that the bond market called their bluff.?
The Fed is buying securities issued by Fannie Mae, Freddie Mac and Ginnie Mae to lower home financing costs and stimulate the economy. The bond purchases of $120.4 billion over two weeks in early March helped lower the average U.S. 30-year fixed rate to 4.78 percent, the lowest since the 1950s. After the next purchases, of $190.5 billion of mortgage securities between March 19 and April 8, rates were the second-lowest on record.
The Fed then bought $175 billion of bonds from April 16 to May 6, up from $30.4 billion during the seven days ended April 15. The result: rates jumped almost half a percentage point to 5.59 percent this week, the highest of the year, according to Freddie Mac. Gross purchases from June 4 through June 10 were $54.7 billion, up from $27.7 billion last week.
Pending sales measuring the number of buyers who sign contracts to purchase previously occupied homes have peaked every June for the last four years, according to the National Association of Realtors.
(To save a copy of the chart, click here.)
Share | Email | Print | A A A
By Kathleen M. Howley
June 12 (Bloomberg) -- The Federal Reserve?s mortgage- buying program to bolster housing demand by lowering fixed interest rates is losing effectiveness at a time of the year when sales of U.S. real estate traditionally peak.
The CHART OF THE DAY shows the Fed?s influence on rates has waned over the course of bond buying that more than doubled purchases in three weeks or less. The first effort, in March, drove rates to a record low. After the last, they rose to a 2009 high. The figures shown exclude sales of bonds.
?The government played chicken with the bond market and it lost,? said Randy Johnson, president of Newport Beach, California-based Independence Mortgage Co. ?If they were able to keep it up long enough, the housing market would heal and the rest on the economy could start its recovery. What has happened, however, is that the bond market called their bluff.?
The Fed is buying securities issued by Fannie Mae, Freddie Mac and Ginnie Mae to lower home financing costs and stimulate the economy. The bond purchases of $120.4 billion over two weeks in early March helped lower the average U.S. 30-year fixed rate to 4.78 percent, the lowest since the 1950s. After the next purchases, of $190.5 billion of mortgage securities between March 19 and April 8, rates were the second-lowest on record.
The Fed then bought $175 billion of bonds from April 16 to May 6, up from $30.4 billion during the seven days ended April 15. The result: rates jumped almost half a percentage point to 5.59 percent this week, the highest of the year, according to Freddie Mac. Gross purchases from June 4 through June 10 were $54.7 billion, up from $27.7 billion last week.
Pending sales measuring the number of buyers who sign contracts to purchase previously occupied homes have peaked every June for the last four years, according to the National Association of Realtors.
(To save a copy of the chart, click here.)