January 11, 2012

D.C. not on Same Page on Housing Policy

January 11, 2012

D.C. not on Same Page on Housing Policy

Mortgage Applications
-Purchase Index, Week/Week 8.1%
-Refinance Index, Week/Week 3.3%
-Composite Index, Week/Week 4.5%
-Gains are fine but this is after three weeks of declines. The housing market is not healthy.

The Fed Beige Book will be release at 11:00 AM PST. Since the Fed has already indicate it will not change rates this year this report will be regarded as an overall assessment of the economy.

UPDATE: here’s the full report.

Germany’s GDP fell 0.25% in 4Q2011. The fact is that the fiscal situations in the EU and in the US will severely restrain growth for the foreseeable future. By “foreseeable future” I mean the next 10 years.

The Fed may be intending to restart its purchase of FNMA and FHLMC debt to help sustain housing prices.

One problem is that the Temporary Payroll Tax Cut Continuation Act of 2011 increased the fees on GSE (aka Fannie, Freddie) debt to offset the losses from the reduced Social Security tax.

These increased fees will of course be passed onto borrowers in the form of higher rates.

This is a glaring case of fiscal policy and monetary policy not being on the same page.

Politics makes for some incredibly bad fiscal policy. Bad fiscal policy creates bad monetary policy.