(TheNicheReport) -- Great news for real estate investors, home shoppers and mortgage borrowers: Operation Twist and other efforts by the United States Federal Reserve to stimulate the economy will continue until at least 2015. The Fed is set to purchase record amounts of mortgage-backed securities to stimulate the employment and housing markets, and does not plan to raise interest rates for another three years.
The combination of Operation Twist with the assertive purchase of mortgage-backed securities points to a previously unheard-of stimulus by the government. The statement by the Fed's Board of Governors indicates that they are committed to energizing the U.S. economy, at least until the employment situation improves. The central bank stated it will enlarge its holdings of long term securities with open ended purchases of $40B of mortgage debt per month. With regard to interest rates, the Fed announced that its "highly accommodative stance of monetary policy" will remain, meaning that the low Annual Percentage Rates (APRs) currently offered by mortgage lenders are set to continue.
Political Motives Observed
The global financial exchanges responded in different ways. Stocks gained along with gold and oil prices, but U.S. bonds and the dollar experienced losses. In Brazil, the Finance Ministry voiced concerns about the dollar's weak outlook against the Brazilian real. In Capitol Hill, Republican Senator John Cornyn stated that the Fed's efforts seem to be politically motivated in light of the presidential election campaign.
The Fed's plans for the economy may seem like part of a maverick plan, but American voters are also being treated by seemingly radical proposals from presidential hopeful Mitt Romney. Analysts agree that both candidates are presenting unique ideas, but then again the U.S. economy has undergone major changes in the 21st century,
The Bottom Line for Housing
The American housing market has shown signs of resilience in 2012. Real estate investors have taken advantage of record low APRs to finance home purchases, and an uptick in median home prices has brought relief to more than a million homeowners who were previously in negative equity situations.
The Fed's announcement gives home shoppers more time to look around with the confidence that mortgage interest rates will remain low for another couple of years. One of the intended effects of the Fed's monetary policy intervention is to keep enticing home buyers with historically low mortgage interest rates, but that will always be contingent upon a reasonable unemployment rate.