The Real Deal Miami

Fed asset sales program could stumble on sluggish housing recovery

February 18, 2010 02:06PM

Not everyone is convinced that this week’s announcement that U.S. housing starts rose 2.8 percent in January was indicative of progress in the housing market’s recovery. Though housing starts came in at a six-month high of 591,000 for the month, the number barely eclipsed last June’s 590,000 starts, Dan Greenhaus, chief economic strategist at trading firm Miller Tabak, pointed out. “Housing starts, like new home sales, have tracked out a decidedly L-shaped recovery,” he said. While a number of policy analysts have suggested the Federal Reserve sell off assets to shrink its balance sheet, some noted that the still-struggling housing market could be a major stumbling block in such a program. “The challenge for the Fed looking at assets sales is that the housing market has not fully recovered,” said John Brady, senior vice president of global interest rates at MF Global. [Financial Times]