Last week, the Fed decided to extend known as Operation Twist, a program where the Fed sells short-term securities and Notes while purchasing long-term Notes and Bonds in an effort to lower long-term rates. The recent negative economic reports on the slow employment growth, the continued elevated levels in unemployment, as well as the recent higher than expected Initial Jobless Claims report all led to the Fed choosing to extend Operation Twist.
The Fed hopes that Operation Twist will spur economic growth due to the access to cheaper money; and while they haven’t mentioned another Quantitative Easing (QE3), this lays groundwork for additional stimulus if necessary. With the rough economic reports continuing to come out of Europe as well as the recent reports released here in the US, now continues to be a great time to purchase a new home.
Forecast for the Week
The New Home Sales data will be released this week, after last week’s weaker than expected Existing Home Sales report. The Pending Home Sales will also be coming this week on Wednesday. The Gross Domestic Product (GDP) will be coming this Thursday for the final reading of the first quarter of 2012. Additionally, the Personal Income and Spending and Core Personal Consumption Expenditure reports will be released later in the week and are expected to be closely watched by investors.
It’s important to remember that weak economic news typically causes money to flow out of Stocks and into Bonds which helps both Bonds as well as home loan rates to improve. The important point to take away from the recent market news reports is that now continues to be an excellent time to purchase or refinance a home as home loan rates continue to remain near historic lows.
Graph Data Source: Haver Analytics courtesy of www.bloomberg.com.