Fed Has Few Tools To Fix Economy Weakened By Housing Market

U.S. mortgage rates are the lowest in at least four decades, with a 30-year fixed loan available at 4.09 percent. That didn’t help Alexis Wolf buy a townhome in Beaverton, Oregon.

“Unless you have family help, you’re stuck renting,” said Wolf, 26, a real estate broker who turned to relatives for a loan because she didn’t have the credit and employment history needed to qualify for a mortgage.

Wolf’s experience illustrates the predicament for Federal Reserve policy makers as they end a two-day meeting today to consider ways to boost economic growth. Low interest rates, the traditional medicine for a flagging economy, aren’t helping housing, which since 1982 has aided every recovery except the current one.

Sales of existing homes dropped in July to the lowest since November, and the median price slid 4.4 percent from a year earlier. Rising foreclosures, tighter lending standards and unemployment stuck near 9 percent for more than two years are all weighing on the market. Lower borrowing costs aren’t likely to make a difference, said housing economist Brad Hunter.

“The Fed’s actions probably won’t help housing in a meaningful way,” said Hunter, chief economist and national director of consulting at Metrostudy, a Houston-based housing research firm that provides data to 18 of the 20 largest U.S. builders. “The level of mortgage rates is not a major factor. Rates are at extremely attractive levels.”

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