The Federal Reserve Bank’s “termination” of a mortgage purchasing program won't be detrimental to the nascent economic recovery in the U.S., writes business pundit Brian Wesbury.
“With evidence of a self-sustaining economic recovery now hard to deny, many pundits are finding new reasons to be bearish. The most recent is that the Federal Reserve has officially ended its massive — $1.25 trillion — mortgage purchasing program,” writes Wesbury in his column in Forbes Magazine, along with his writing partner, Robert Stein.
“This, some say, will lead to another downturn in housing, which could drag the economy down all over again.”
Though the end of the Fed's purchases will certainly not boost the housing market, Wesbury does not reckon the move will result in a "double-dip" for housing or the economy.
“Instead, we expect home building, home sales and home prices to all be up a year from now vs. where they are today,” says Wesbury. “Not on every street or in every community, but for the nation as a whole.”
Wesbury also says that many observers of the mortgage market know that the total amount of lending necessary to support the housing market in 2011 is not particularly large by historical standards.
“Lower home prices, relatively low levels of sales and the high loan-to-value ratios that prevailed during the bubble years mean that the capital needed to support housing in the next year is not that substantial,” writes Wesbury.
Other pundits agree, and ABC News is reporting that the chances of a “double dip recession” are increasingly unlikely.
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