Stocks: Attention shifts to housing

Investors will look toward the housing market this week, after the Federal Reserve announced it would buy $40 billion of mortgage-backed securities each month until conditions improve.

The central bank hopes that the much-anticipated quantitative easing, or QE3, will “put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative,” according to the Fed’s official statement issued Thursday.

Housing legitimately was recovering before, but now it’s going to go up much quicker

Housing data will take center stage, especially with so much of the Fed’s emphasis placed on bolstering the housing market. Investors will digest reports on mortgages, housing starts, building permits and existing home sales.

The housing market has been gaining strength in recent months. Home values are back to levels not seen since the beginning of the Obama administration and the number of homeowners who are underwater on their mortgage is down 11% since last year, according to a Department of Housing and Urban Development (HUD) and Department of the Treasury report out last week.

While QE3 won’t impact the data coming out this week, analysts say that the anticipated good news will foreshadow even better news that may come once the Fed’s plan kicks in.

“Housing legitimately was recovering before, but now it’s going to go up much quicker,” said Uri Landesman, president of Platinum Partners. “People are going to look forward to the coming numbers after the Fed starts buying bonds.”

Investors will also be keeping an eye on housing stocks, which rallied last week on the Fed news. Shares of homebuilders Hovnanian (HOV), Pulte Group (PHM), Lennar (LEN) and Toll Brothers (TOL) got a boost from the Fed’s announcement.


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