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Uncertainty over the Federal Reserve’s next moves is disrupting the housing sector and threatening to send the U.S. economy into a tailspin, three prominent real estate industry trade groups warned in a letter Monday. In it, they urged Fed policymakers to promise that they’re done hiking rates and have no plans to sell trillions of dollars worth of mortgage bonds that the central bank bought during the pandemic.
The joint letter from the Mortgage Bankers Association (MBA), National Association of Realtors (NAR) and National Association of Home Builders (NAHB) echoes concerns voiced on national television last week by MBA CEO Bob Broeksmit.
In a CNBC appearance Wednesday, Broeksmit urged Fed policymakers to “be clear that they’re done with rate increases” and to also “make clear that they’re not going to sell mortgage-backed securities off their balance sheets.”
In an attempt to keep the economy from crashing during the pandemic, the Fed not only brought short-term interest rates down to nearly 0 percent but bought trillions of long-term Treasurys and mortgage-backed securities (MBS) to bring interest rates down and encourage borrowing.
Fed has trimmed $1 trillion from balance sheet
Source: Board of Governors of the Federal Reserve System, Federal Reserve Bank of St. Louis
Mortgage rates dropped to historic lows until the Fed began tightening last year — not only by raising short-term interest rates but by trimming its massive holdings of government bonds and MBS.
So far, the Fed hasn’t sold any of those assets — it’s just allowing up to $60 billion in maturing Treasurys and $35 billion in MBS to roll off its…