"You Idiots All Paid Too Much For Your Houses..."
That's essentially what Bernanke ("The Beard," as he's called on Dealbreaker) and his cadre of head-nodders are saying here. They need to keep "purchasing" government paper (really they're just moving money from one pocket to the other and pretending the result isn't just a declaration from on high, a la the Soviets...) in order to artificially lower financing costs so that all the
bagholders homeowners homedebtors out there can refinance, and to try and bring a few new buyers into the mix.
If they let the market set rates, of course, they'd be higher, and house prices would drop even more quickly than the current, -19% clip, putting more people into negative equity situations. As studies have shown, people walk away from their homes not because they can't afford their mortgages, but when they feel like paying them is a sucker's game. Obviously, The Beard and his co-horts think lowering the rates and encouraging refinancing will counteract this on both fronts, but looking at it from a less charitable point of view, they're clearly saying, "You idiots paid too much for your houses."
As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.
Don't believe any of those pundits out there telling you the bottom is in, or near, on home prices. It's not. The only thing we're seeing is an artificial slowing of the rate of decay, brought to you courtesy some insanely expensive market manipulation.