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How Quantitative Easing Can Affect U.S. Housing Demand and Prices

Article Quant Q&A · Author: Chayoot
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Summary

The document asks whether Federal Reserve quantitative easing should increase U.S. home sales and prices, noting an apparent decline in housing prices after 2009. Its answer first corrects a key distinction: encouraging home purchases means more demand, while encouraging home sales can mean more supply and potentially lower prices. QE is described as lowering long-term interest rates, including mortgage rates, which can support housing prices, all else equal.

The response says housing prices had substantially recovered after QE began, but offers no data, causal analysis, or measure of sales volume. The explanation is therefore a brief conceptual clarification rather than evidence that QE caused a particular change in sales or prices. It also leaves out other forces affecting housing markets, so the stated relationship should be read as conditional, not as a complete account of post-2009 housing trends.

Key ideas

  • QE can lower long-term interest rates, including mortgage rates.
  • Lower mortgage rates can support housing prices, all else equal.
  • More home purchases reflect demand, while more home sales may also reflect increased supply.
  • The response gives no empirical analysis establishing QE's effect on U.S. housing sales or prices.

Tags

Fixed incomeUS marketsMulti-asset
Full text
# How does Fed Qe affect the housing sales in the US? Why does it happen to be that way?


# How does Fed Qe affect the housing sales in the US? Why does it happen to be that way?












From my research, Fed's Qe should encourage house sales, however the graph shows houses price in the state seem to gradually go down after 2009. Isn't that contradicting itself? Ain't the increase in demand suppose to push the price of houses to go up? or am I wrong. Is the Fed Qe effective at inducing the house sales in the US? And if so why does it happens to be that way?

## Answer by dm63 (score 0)

https://quant.stackexchange.com/a/22240

There is a contradiction in your statement. If QE supposedly motivates house sales, then the price should indeed go down. I think you are trying to say that QE should motivate house purchases. Well, QE is designed to make long term interest rates (including mortgage rates) go down, so yes it should help housing prices, ceteris paribus. If you observe, housing prices have indeed recovered substantially since QE was initiated.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.