Last week's federal stimulus has yet to affect recovery in the housing market, even with a promised $40 billion a month for agency mortgage-backed securities. The initiative seeks to put downward pressure on long-term interest rates to support mortgage markets, according to Fed Chairman Ben S. Bernanke. The increasing cost of homes, he said, would spur more consumers to consider their housing options, encouraging lenders to provide more mortgage loans. Recent consumer credit reports
suggest, though, that even with consumers wanting to buy a home or refinance, many don't qualify due to poor credit. Even with the stimulus funneling in billions of fresh dollars, the number of people buying homes isn't likely to increase much, according to Lawrence Yun, chief economist for the National Association of Realtors. "[People] are seeing a dangling low fruit, but they just cannot reach it," Yun said. With consumers hesitant to refinance, the stimulus could give a much-needed boost to the confidence of home-builders expecting higher demand, which could likewise result from the construction of new homes. Newly-manufactured homes have proven better options in the past for people with alternative credit
scores. According to Wells Fargo senior economist Mark Vitner, Bernanke's housing "boost" was really to support home-building, not buying. With the Fed's stimulus still in its infancy, it's difficult to tell yet if it will have the desired effect on the housing market. Coming months should tell if the stimulus proves effective at increasing the market's accommodation to low-credit consumers and whether confidence can be bolstered enough to inspire new home purchases.