Wednesday, January 12, 2011

Real Estate Outlook: Federal Reserve Promoting Recovery

Even the Federal Reserve is feeling positive these days (as if they had a choice!). With all the action they are taking to minimize the economic downfall and help our country recover, there seems to be some semblance of a plan in place... lets hope they know what they are doing!

Here is the article by:
Carla Hill

Deflation fears are gradually receding. Last year's Federal Reserve action to buy $600 billion worth of Treasury Bonds was an attempt to spur recovery and keep long-term interest rates low. It appears that board members are now mildly optimistic about 2011.

According to the Federal Reserve, "The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit."
In order to continue this promotion of recovery, and to ensure healthy levels of inflation, the Federal Reserve committee had decided "to continue expanding its holdings of securities." The Fed will be buying "$600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month."
Home sales are on the rise as well -- in both pending and news home sales indices. Pending home sales rose by 3.5 percent in November, thanks largely to an unprecedented 18.2 percent jump in the West.

"If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume," reports National Association of Realtors chief economist, Lawrence Yun. "Credit remains tight, but if lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy."
National Association of Home Builders' Chairman, Bob Jones, reports that "with consumer interest in new homes expected to continue to revive as the economy and job markets improve, and inventories of new homes for sale near record lows, our concern now is that a lack of construction financing will keep builders from being able to expand the selection of what they have to offer buyers heading into the spring."
The economy still needs time to recover, however. December figures on retail sales indicate that sales were below what analysts had predicted. Stocks, however, were off to an energetic start last week for the beginning of 2011. According to the New York Times, the first day of trading saw the market reach its highest level since 2008.

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