Chris Low: The Federal Reserve and the housing market
A home is offered for sale in Hawthorn Woods, Illinois.
Jeremy Hobson: Well now let's get to the housing market. In the last few days, a couple of top officials from the Federal Reserve have been suggesting the central bank could do even more to boost home buying.
For details, let's bring in our regular Friday guest, Chris Low of FTN Financial. He is live with us from New York. Good morning.
Chris Low: Good morning.
Hobson: So Chris, first tell us what are these Fed officials talking about doing?
Low: Well, yeah that's right, the latest one of these came from fed governor Dan Turillo, who spoke in New York City last night. The topic of the speech was unemployment and what the Fed can do.
And basically after emphasizing just how big the problem is, he drilled down to saying the one thing the Fed probably can do is drive mortgage rates lower, get the housing market going again, and hopefully get some jobs there.
Hobson: But aren't mortgage rates already at historic lows right now?
Low: They are at historic lows, and this is one of those things where we're all looking at this speech saying, "Okay, so, now what? Push rates to three and a half and maybe you'll get some refinance activity? The problem is though, that an awful lot of people would like to refinance their loans already, but either don't have enough equity to do it or can't get approval from the banks.
Hobson: Yeah that's right, the banks aren't lending to a lot of people. Chris, what about the other argument here, which is that we've had some inflation figures come out this week; they're not very significant but they're not insignificant. Is there an argument to be made that the Fed shouldn't be doing anything right now?
Low: Well, there is, and in fact Turillo himself mentioned this. There's a pretty clear link between the Fed's easing in the last couple of years and the waves of inflation -- three of them -- that we've had since 2008.
So one thing he did say is that if the Fed's going to try and push mortgage rates lower, they're going to wait until inflation is lower first. So none of this is going to happen unless inflation drops to one percent or so.
Hobson: Chris Low, chief economist with FTN Financial, thanks so much as always.
Low: You're welcome, thank you.