Last week, the Federal Reserve announced a new round of “quantitative easing,” or QE3, meaning the Federal Reserve will fire up the printing presses to buy $40 billion worth of mortgage-backed securities (MBS) every month on an open-ended basis in an effort to further drive down historically low interest rates.
Federal Reserve Chairman Ben Bernanke said QE3 should put downward pressure on mortgage rates, helping the housing market. By lowering borrowing costs and spurring banks to lend more, the Fed hopes to induce more spending and eventually set the stage for more hiring. The Fed tied its bond-purchase program explicitly to jobs, saying it will keep buying bonds until it sees a substantial improvement in the labor market.
Who benefits from QE3?
Following up to our previous article titled, “
In each of the last three years, home prices have increased in the spring and summer, when more people are buying homes, before giving back all of those gains and then some in the fall and winter, when activity cools.
Consider Minneapolis, Minn. You could’ve bought, out of foreclosure, a three-bedroom, two-bath house of 1,356 square feet on a quarter acre lot for about $29,000. It needed a lot of work, but houses in the neighborhood recently sold for $75,000.