Will Fed's Mortgage Buying Juice the Housing Recovery?

Home prices are stabilizing, and new construction is bouncing back, but apparently the U.S. Federal Reserve isn't buying a bullish housing recovery.
 

Its announcement Thursday that it would buy up to $40 billion in agency mortgage-backed securities every month, with no clear finish line, says loud and clear that the Fed thinks housing needs more stimulus. (Read More: Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates.)

Mortgage rates are already hovering near record lows, but mortgage applications, especially to purchase a home, have been weak. So many have refinanced already at low rates, and so many more are unable to refinance because of lack of home equity or high fees. 

As for home buying, the real growth in that area this year has been among investors on the low end, largely using all cash.

Supplies of foreclosed properties have been shrinking dramatically, as those investors swarm auctions and bid on bulk deals. (Read More: How Investors Are Skewing Home Price Recovery.)

The hot and still heating rental market offers potentially more rewards than the volatile stock market.

In turn, all that activity on the distressed end is pushing up home prices. While overall foreclosure activity is falling, we could see volumes of bank-owned properties for sale rising over the next few months, as banks look to take advantage of rising demand and prices.

We are already seeing spikes in foreclosures activity in states where these cases had been backed up in the courts.

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