The Oregon Biz Report - Business News from Oregon

Read about accutane journal moderate acne here

Latest Federal Stimulus Program Will NOT Help Housing Market

December 1, 2008

By Bill Conerly, Businomics, Conerly Consulting LLC

The government’s latest plan (as of today, November 26, 2008) has the Fed buying mortgage-backed securities from Fannie, Freddie and the gang.  I’m OK with the program in general, but here’s a bit of hubris I cannot tolerate: the claim that it will help the housing market.

Housing consists of owner-occupied (or increasingly owner-unoccupied) plus rental housing.  The proportions are roughly two-thirds owned, one-third rented.  Bringing down mortgage interest rates will help one sector of the market, but only at the expense of the other.  As I showed with charts in this post from a couple of weeks ago, we have an excess supply of both types of housing.  There is no solution to the excess supply of housing other than to have a good-sized fire, or grow our population.  The latter solution works, and works well, but at a slow pace.  We grow our population by about one percent per year, so we’ll eventually grow to fit our housing stock.

Here’s what I like about the plan:  it silences critics of the Fed who say that they don’t have much room to ease monetary policy.  Sure, the Fed Funds rate is less than one percent, so the usual interest rate that the Fed influences cannot be moved much further.  But the Fed can conduct monetary policy in any number of instruments, including mortgages.  (Many years ago, the Swiss wanted to conduct open market operations but there were no Swiss treasury bonds outstanding, because the country had been running a balanced budget.  So their central bank conducted monetary policy buying and selling mortgages rather than treasuries.  No problem.)


Bill Conerly is principal of Conerly Consulting LLC, chief economist of, and was previously Senior Vice President at First Interstate Bank. Bill Conerly writes up-to-date comments on the economy on his blog called “Businomics” and produces a monthly audio magazine available on CD. Conerly is author of “Businomics™: From the Headlines to Your Bottom Line: How to Profit in Any Economic Cycle”, which connects the dots between the economic news and business decisions.

Print This Post Print This Post    Email This Post Email This Post

Discuss this article

Gienie December 1, 2008

This situation is a little over the top for me, as I’m sure it is for others who think the bail out was rediculous.

I know a couple who is losing their house (who readily admit they made bad choices) but have gone through more hoops than they can count to try and save their home.

The money hasn’t trickled down fast enough, and when they went to look into different options their financial institution stated the process would take too long, and they would not qualify for funding because they were already so far in the forclosure process.

NOT once did the feds talk about who this would help, and what qualifications you would have to meet to receive help.

Either way they are losing their home and this “bail out” was more trouble than it was worth.

Ben December 1, 2008

Nothing will help the housing market until people have more disposable income. Delaying foreclosures only does just that delay foreclosures. The feds need to be more exacting in their solutions.

newserman December 1, 2008

News noet from NAHB:”Sales of new single-family homes declined 5.3 percent in October to a seasonally adjusted annual rate of 433,000, the U.S. Commerce Department reported today.”

Leave a Reply

Your email address will not be published. Required fields are marked *

Please answer the following question to confirm that you are a real person: *

Top Business News


Top Natural Resource News


Top Faith News


Copyright © 2019, OregonReport. All Rights Reserved. | Terms of Use - Copyright - Legal Policy | Contact Oregon Report

--> --> -->