Analysis: Housing market to limp along, government hands tied

By Margaret Chadbourn

The Fed’s twist will help, but it won’t be enough to turn around the troubled U.S. housing sector. Ditto for Washington’s other plans to help homeowners. The Federal Reserve surprised investors on Wednesday when it said it would help keep mortgage interest rates low by reinvesting proceeds from past purchases of housing debt into government-backed mortgage securities. The program is part of the Fed’s latest easing initiative, which investors dubbed “Operation Twist,” after a similar program in the 1960s. Frustrations are growing in Washington that efforts to revive housing have failed in the face of high unemployment and rampant foreclosures that have ravaged home prices. Karen Petrou, managing partner of Federal Financial Analytics Inc., in Washington, said the administration’s best hope to support housing would be to ramp up the refinancing initiative. If there was an easy way out of this, then a solution would be done,” Petrou said. “The refinance proposal is the remaining cannon in the arsenal.”