FORTUNE -- The Federal Reserve on Wednesday pressed ahead with its stimulus program of asset purchases and low interest rates. Yup, as widely expected (and reported), the end of its two-day meeting was pretty much a snoozer: For the most part, the central bank made few changes to its description of the state of the economy, saying that it has "continued to expand at a moderate pace" and job markets "have shown further improvement."
What's interesting, however, is that policymakers slightly changed their views of the housing industry, acknowledging that the recovery has "slowed somewhat in recent months." It was only at its last meeting in September when the central bank said the housing industry was "strengthening."
Whatever the Fed's take, it would be short-sighted to read too much into it. After all, what the central bank chooses to say and not say is puzzling. Even though the government shutdown cost the U.S. economy billions of dollars, it made no direct mention that Uncle Sam was partially out of business for more than two weeks.
And yet, the Fed chose to bring up the state of the housing market. True it has modestly slowed down, but that's inconsequential because the recovery is nowhere near reversing. Home prices are rising more slowly now than in the spring, but they're still climbing fast, writes Jed Kolko, chief economist at real-estate website Trulia.
One main reason: Nationally, and in all of the 100 largest metro areas, it's still significantly cheaper to buy than rent, Kolko says. Mortgage rates have made buying more expensive; the 30-year fixed rate is now 4.8% compared with 3.75% a year ago. And as a result, the cost gap between buying vs. renting has narrowed. A year ago, it was 45% cheaper to buy than rent in the U.S. That has fallen to 35% today, but the cost incentive to buy is still substantial.
There are caveats, of course, where it's harder to justify the costs of buying over renting. Across several parts of California such as San Francisco, San Diego, and Los Angeles, buying isn't that much cheaper than renting, according to Trulia. However, buying is a bargain in places like West Palm Beach, Fla., as well as parts of Ohio and Michigan.
Meanwhile, U.S. home prices have continued to recover, which gives those on the fence about selling a reason to put their home on the market and help stabilize prices. In August, prices rose at their fastest annual pace since February 2006 -- the height of the housing bubble, according to the latest reading from the S&P/Case-Shiller Home Prices Indices. On average, prices are back to their mid-2004 levels, but still roughly 20% below their summer 2006 peak.
Both home prices and mortgage rates are rising from record lows. So whatever worries the Fed has about the economy, it likely has less to do with housing than uncertainty surrounding Washington.
More than 80% of mortgage applications are for 30-year fixed-rate mortgages. They are critical to a healthy housing market.
FORTUNE -- As Washington talks about the future of mortgage finance giants Freddie Mac and Fannie Mae, some are asking if Americans should continue having easy access to a popular mortgage -- the 30-year, fixed-rate home loan.
It has been around for decades. Banks typically don't like to hold onto the risks of these MORENin-Hai Tseng, Writer - Sep 25, 2013 8:49 AM ET
After the housing market collapsed, many economists predicted a similar fate for commercial real estate. Here's why it never happened.
FORTUNE -- Hilton Worldwide recently announced plans to return to the public market, after The Blackstone Group (BX) took the hotel giant private in 2007.
The private equity firm is eager to recoup some of the $26 billion it paid for the chain just before the credit crunch. Whether Blackstone will be MORENin-Hai Tseng, Writer - Sep 23, 2013 11:44 AM ET
More good news for the housing market, as people now prioritize the mortgage bill ahead of car loan and credit cards.
FORTUNE -- In another sign the U.S. housing market is recovering, financially distressed borrowers are starting to make their mortgage payments before their credit cards bills -- a near reversal of a trend that emerged after the housing market crashed.
It's a positive development, reflecting the rebound in U.S. home prices MORENin-Hai Tseng, Writer - Sep 19, 2013 10:20 AM ET
Only the rich will see much benefit from looser lending standards for mortgages.
FORTUNE -- After years of tighter lending standards, U.S. lenders are turning on the credit spigot again. This comes as banks try to compete harder for customers, given that the spike in borrowing costs has quickly shrunken the lucrative market for home refinancing.
JPMorgan Chase (JPM), the nation's largest bank, is relaxing mortgage-lending standards in housing markets hard hit MORENin-Hai Tseng, Writer - Sep 13, 2013 11:48 AM ET
Richmond, California is saving local underwater mortgage holders from the banks. Where was this solution four years ago?
FORTUNE – In the wake of the financial crisis in 2008, it seemed like everyone from Wall Street to America's auto industry got a bailout; the government swooped in to rescue companies from Bank of America (BAC) to General Motors (GM) and American International Group (AIG).
And as home prices collapsed, Uncle Sam tried MORENin-Hai Tseng, Writer - Jul 31, 2013 10:41 AM ET
History has shown that the housing market and GDP aren't linked.
FORTUNE – Home prices across America's 20 major cities in May climbed 12.2% higher from a year earlier, according to the S&P/Case-Shiller Home Price index, a widely watched gauge of the health of the U.S. housing market. This number, reported Tuesday, was higher than most expected and the biggest annual gain since March 2006.
Since the Great Recession ended, many assumed MORENin-Hai Tseng, Writer - Jul 30, 2013 10:50 AM ET
Investor frenzy has lost steam.
FORTUNE – Sales of previously owned homes may have slowed, but don't take it as a sign that the housing recovery has hit a bump. On Monday, the National Association of Realtors reported sales fell 1.2% in June from the previous month; it warned higher home prices and mortgage rates could hit buyers in the coming months.
Sales may indeed slow, but that probably will have less to MORENin-Hai Tseng, Writer - Jul 23, 2013 11:03 AM ET
U.S. home prices may not rise as fast as they had been, but take it as a sign of normal.
FORTUNE – For many months now, U.S. home prices have risen to new highs as the housing market recovers from one of the worst crashes in recent history. The rebound comes as more Americans find jobs and as homebuyers work their way through the remaining housing inventory following years of lackluster MORENin-Hai Tseng, Writer - Jun 28, 2013 5:00 AM ET
History tells us a gradual rise in interest rates won't likely deter homebuyers.
FORTUNE – U.S. Federal Reserve Chairman Ben Bernanke's speech Wednesday will likely push mortgage rates higher in the coming months. The central bank isn't going to raise interest rates soon, he assured, but if the economy continues improving the way it has, it will consider trimming its monthly bond purchases from the current level of $85 billion by the MORENin-Hai Tseng, Writer - Jun 20, 2013 10:36 AM ET
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