Ben Bernanke wants you to buy a house, either a shiny new one or a 1900 Victorian. The Federal Reserve chief also wants you to be able to get an affordable mortgage -- or refinance your current home loan into a new one with a lower interest rate that will free up cash, make you feel richer and get you spending again.
Bernanke's goal? Create a positive feedback loop that gets the economy growing fast enough to shrink the 8.1 percent unemployment rate. Bernanke made that clear Thursday when he launched a third round of quantitative easing, or bond buying, and singled out mortgage-backed bonds as the recipient of the Fed's $400 billion-per-month purchase plan.
The Fed's emphasis on housing is why Wall Street will be analyzing three housing reports out this week. The data, which include today's report from the National Association of Home Builders on September home builder confidence and readings out Wednesday on August housing starts and existing home sales, will serve as a barometer of the improving housing market and a future benchmark to measure how the Fed's plan is working.
With the Fed promising to buy mortgage bonds until the job market heals, weaker-than-expected housing reports, at least for now, won't kill stocks. "If it's a bad print, the Fed will keep buying more mortgage-backed bonds and keep their plan in place longer," says Bruce Bittles, chief investment strategist at R.W. Baird. "If the news is good, it means the economy is improving. It's a win-win."
