Make us your home page
Instagram

Some Federal Reserve members worry the government may need to intervene more in housing market

At the meeting, Chairman Ben Bernanke and the Fed left their interest rate target unchanged at levels near zero. 

Associated Press

At the meeting, Chairman Ben Bernanke and the Fed left their interest rate target unchanged at levels near zero. 

Despite extensive government intervention in the housing market, some policymakers at the Federal Reserve are worried that even more might need to be done.

The minutes of the Federal Open Market Committee's mid-December meeting, released on Wednesday, reflect a lingering wariness about the strength of the recovery in light of high unemployment and substantial slack in the economy.

At the same time, worries are growing that a tentative comeback in the housing market could fall apart as a tax credit for home buyers expires and the Fed's program to hold down mortgage rates comes to a close.

Concern about housing deepened Wednesday with the release of new data showing that long-term interest rates are rising rapidly from their historic lows, while mortgage applications to purchase houses are falling. Applications are at their lowest level in 12 years.

Other signs of stress in real estate have become apparent in the past few weeks, although most economists say any downturn will be relatively mild.

If they are wrong and the modest pace of economic growth slows or mortgage markets significantly deteriorate, "a few members" of the Federal Open Market Committee said they believe that "more policy stimulus" might be desirable in the future, the Fed minutes say.

But one member of the panel took an opposite view, saying that the "quantity of planned asset purchases could be scaled back" because of continuing improvements in the economy.

Noting the contrast between "a few" and "one," BMO Capital Markets senior economist Michael Gregory projected a shift in policy.

"There emerged a definite skew towards more accommodation," Gregory wrote in a research note.

The Mortgage Bankers Association said Wednesday that rates rose in the last two weeks of December to 5.18 percent from 4.92 percent. Applications for purchases of mortgages fell.

Mortgage applications offer an imperfect glimpse into the state of the housing market. For example, if many houses are being bought by speculators with cash — as is the case now — that activity is not reflected in the figures.

Nevertheless, the trend is sharply down. Applications have dropped by more than 25 percent from their level at the end of 2008, the banking group said.

Chairman Ben Bernanke and the Fed left their interest rate target unchanged at levels near zero at the meeting, and the minutes indicate that most members believe that inflation is not an imminent threat to the economy.

"They're very anxious not to torpedo the stabilization we've seen in the housing market, but they don't want inflation expectations to get out of hand," said John Canally, an economist at LPL Financial. "They're walking a pretty narrow tightrope this year."

Some Federal Reserve members worry the government may need to intervene more in housing market 01/06/10 [Last modified: Wednesday, January 6, 2010 8:57pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, New York Times.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Airbag maker Takata bankruptcy filing expected in Japan, U.S.

    Corporate

    DETROIT — Japanese airbag maker Takata Corp. has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of faulty air bag inflators.

  2. Federal agencies demand records from SeaWorld theme park

    Tourism

    ORLANDO — Two federal agencies are reportedly demanding financial records from SeaWorld.

    Killer whales Ikaika and Corky participate in behaviors commonly done in the wild during SeaWorld's Killer Whale educational presentation in this photo from Jan. 9. SeaWorld has been subpoenaed by two federal agencies for comments that executives and the company made in August 2014 about the impact from the "Blackfish" documentary. 
[Nelvin C. Cepeda/San Diego Union-Tribune/TNS]
  3. Legalized medical marijuana signed into law by Rick Scott

    State Roundup

    TALLAHASSEE — Gov. Rick Scott on Friday signed into law a broader medical marijuana system for the state, following through on a promise he made earlier this month.

    Gov. Rick Scott signed legislation on Friday that legalizes medical marijuana in Florida.
  4. Line of moms welcome Once Upon A Child to Carrollwood

    Business

    CARROLLWOOD — Strollers of all shapes and sizes are lined up in front of the store, and inside, there are racks of children's clothing in every color of the rainbow.

    At Once Upon A Child, you often as many baby strollers outside as you find baby furniture and accessories. It recently opened this location in Carrollwood. Photo by Danielle Hauser
  5. Pastries N Chaat brings North India cuisine to North Tampa

    Business

    TAMPA — Pastries N Chaat, a new restaurant offering Indian street food, opened this week near the University of South Florida.

    The menu at Pastries N Chaat includes a large variety of Biriyani, an entree owners say is beloved by millions. Photo courtesy of Pastries N Chaat.