patrick.net

Hey --- the good news is that, according to theory, house prices will go down as mortgage rates go down ;)

I don't think this will affect home prices much. Probably interest rates aren't limiting demand right now as much as economic uncertainty, wage stagnation, and high food/fuel costs.

Plus, how much below 4% will they go (30 yr fixed today is 4.13)?

Plus plus, this is bad timing on Benny's part. First, this would have a greater impact if this was done at the start of the spring selling season. Second, if rates are going to be low through 2013, what's the rush to buy now? Sure, you may get a better rate by 0.25-0.5, but hey, house prices could also drop another 5-10%

Refi's, on the other hand, may pick up:

Will there be another Refinance Boom?
http://www.calculatedriskblog.com/2011/09/will-there-be-another-refinance-boom.html

I think the psychology here is important. The Fed will do whatever it takes to stabilize the housing market. Once house prices start going up, more people will be able to refi resulting in more stability. It could bounce back quickly.

they are saving the banks, not the housing. any affect on housing is an afterthought or accident not an intent.

FortWayne says

they are saving the banks, not the housing. any affect on housing is an afterthought or accident not an intent.

http://en.wikipedia.org/wiki/Federal_Reserve_System

Current functions of the Federal Reserve System include...
- To address the problem of banking panics
- To serve as the central bank for the United States
- To strike a balance between private interests of banks and the centralized responsibility of government
-- To supervise and regulate banking institutions
-- To protect the credit rights of consumers
- To manage the nation's money supply through monetary policy to achieve - the sometimes-conflicting goals of
-- maximum employment
-- stable prices, including prevention of either inflation or deflation
-- moderate long-term interest rates
- To maintain the stability of the financial system and contain systemic risk in financial markets
- To provide financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system
-- To facilitate the exchange of payments among regions
-- To respond to local liquidity needs
- To strengthen U.S. standing in the world economy

bert says

The Fed will do whatever it takes to stabilize the housing market.

As opposed to what the Fed has been doing for the last 3-4 years? What makes you think it will work now? Giving more money to banksters hasn't really done much besides giving them record profits again and creating a phantom rally in the stock market.

corntrollio says

As opposed to what the Fed has been doing for the last 3-4 years? What makes you think it will work now?

Bingo.

corntrollio says

As opposed to what the Fed has been doing for the last 3-4 years? What makes you think it will work now? Giving more money to banksters hasn't really done much besides giving them record profits again and creating a phantom rally in the stock market.

Because rates went to zero and everyone thought the Fed could do no more. But today's action changes the psychology. The Fed has signaled that recovery is more important than inflation risks, and it has the ability to act.

bert says

Because rates went to zero and everyone thought the Fed could do no more.

Except that the Fed has already been doing more. QE3 by a different name is not new.

corntrollio says

QE3 by a different name is not new.

It's not exactly QE3 - no additional purchases (i.e., the balance sheet is not expanding). Just a re-alignment of assets. They are selling off shorter term bonds and buying longer term bonds.