US Housing Still Dragging its Feet – QE3 Still on the Cards
US Existing Home Sales rose by around 5% to an annual pace of 4.61 million, from a revised 4.39 million last month. This is within expectations of 4.65 million.
Yet while this is a rise, the pace is still far from the good years. The tendency for another round of Quantitative Easing leans towards the aiding mortgage based assets.
Earlier housing figures released this week have shown that while multifamily homes have probably bottomed out, single family homes are still struggling. Housing starts have actually fallen. It still isn’t safe to say that the whole housing sector is moving up.
The housing bubble brought the economy down, and a clear rise of this sector is still needed for seeing a smile on Bernanke’s face.
Buying treasury bonds in previous rounds of QE ran its course. Yields are already very low, and further asset buying will not encourage more lending.
But with mortgage based assets, the story is quite different and there is a majority within the Federal Reserve wants to act in order to heal this sector.
The Fed isn’t likely to act in next week’s meeting, yet QE3 in the second half of 2012 is still on the cards with these figures. For forecasts about the upcoming meeting, see the FXStreet poll.
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I’m not convinced that we see QE3 this year, the election will likely take any action off the table in H2, which leaves H1 – and at present the data is surprisingly good for the US economy, not to mention the likely higher hurdle to doing another round of QE. But I agree, that if the Fed does end up going for another round, it will almost certainly be targeted at the housing market e.g. MBS’s
Thanks for your comment. Indeed, I agree that the elections will likely curb the chances of such a move. Expectations are still high though.