New Housing Woes - Fed Tightening Credit

[Joseph Burkeson, CMI]

I expect this could break the housing recovery for the near term until the private credit market can once again discover how to create profit mortgaging homes.

PIMCO: End of mortgage buys form of tightening
(Reuters) - The end of the Federal Reserve's program of purchasing $1.25 trillion of mortgage-backed securities at the end of March is a form of tightening monetary policy, the chief of the largest U.S. bond fund manager said on Tuesday.

Mohamed El-Erian, chief executive and co-chief investment officer of Pacific Investment Management Co, or PIMCO, said the end of the Fed's mortgage program, one of the U.S. central bank's major support programs, signals a form of credit tightening.

The Federal Reserve Open Market Committee's statement on Tuesday "met market expectations on the three key aspects of leaving interest rates unchanged, maintaining dovish language about future policy moves and allowing the special programs to lapse," El-Erian told Reuters.

By the end of March, the Fed plans to have bought $1.25 trillion worth of mortgage-backed securities and about $175 billion worth of agency debt -- a process economists and investors have called "quantitative easing."

The unwind of the program weans the U.S. economy from government support at a time when the Fed believes the recovery is gathering some strength.

[James H. Bushart]

I heard, today, that the USDA Rural Development Loan money is gone.

[Michael Larson]

Does this mean the governments efforts of propping up the housing market are over?

[James H. Bushart]

Every time some one in America gets a bad break....there is a RWNJ creamin' his jeans.

How sad.

[Joseph Burkeson, CMI]

Originally Posted by mlarson

Does this mean the governments efforts of propping up the housing market are over?

You make it sound like a bad thing.

[Michael Larson]

Originally Posted by jburkeson1

You make it sound like a bad thing.

Did you check with James before you answered?

I think it is a good thing to stop the government prop up as it has only delayed what is likely the inevitable.

[Michael Larson]

Originally Posted by jbushart

Every time some one in America gets a bad break....there is a RWNJ creamin' his jeans.

How sad.

And a LWNJ with his mouth firmly attached to the government teat.

Sad indeed.

[Joseph Burkeson, CMI]

Originally Posted by mlarson

I think it is a good thing to stop the government prop up as it has only delayed what is likely the inevitable.

Please tell us more about this great "inevitability" you predict.

[Michael Larson]

Originally Posted by jburkeson1

Please tell us more about this great "inevitability" you predict.

Until typical housing prices reach the sustainable rate of 3x annual income the correction is not over.

[Joseph Burkeson, CMI]

Originally Posted by mlarson

Until typical housing prices reach the sustainable rate of 3x annual income the correction is not over.

So that is it, a simple market correction? How scary!

What? No doom!

[Michael Larson]

Originally Posted by jburkeson1

So that is it?

Does there need to be more?

Please explain.

[Joseph Burkeson, CMI]

Originally Posted by mlarson

Does there need to be more?

Please explain.

You are the great seer, please predict!

[Michael Larson]

Originally Posted by jburkeson1

You are the great seer, please predict!

It's just historic reality Joe.

It's not sustainable above the magic 3x annual.

Do you disagree?