BofA: Fed seems OK with declining home sales | North Salem Real Estate


Bank of America Merrill Lynch (BAC) analysts released a note to clients highlighting the response of home sales to continued tapering from the Federal Reserve.

As Federal Reserve chair Janet Yellen indicated last week, the government is keen to continue its support of the economy via purchases of Treasurys and mortgage-backed securities. However, the amount of which it invests in is being gradually decreased.

The BofA analysts said, that by “affirming the QE taper and seemingly doubling down on tightening by adding the “six months” comment, the Fed seems to be saying that it is OK with the 15% decline in pending home sales and may well even be comfortable with further declines.”

“This comes as a surprise to us and forces us to reconsider our investment views for securitized products,” write analysts Justin Borst and Chris Flanagan in their Securitization Weekly report.

New home sales of single-family houses in February dropped 3.3% to 440,000, reaching a 5-month low, according to the latest report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

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