The homebuying market is being impacted by a lot of things, but the price of mortgage money today isn't really among them. Along with income, the mortgage's interest rate is a regulator of how much money a borrower might be able to obtain, relative to the income available to use toward a monthly payment. When rates are low, a given level of income allows the borrower to carry a larger loan amount, but just marginally so, and of course the inverse is also true. In this regard, low mortgage rates may serve to help steady home prices, since buyers in the market can ostensibly afford somewhat higher-priced homes.

But low rates, as alluring as they are, cannot alone overcome all of the other obstacles in the market. Most notably, a weak economy and corresponding poor job market have failed to produce the kind of confidence needed to feel comfortable making the kind of forward-looking commitment which is the purchase of a home. Confidence is further eroded by the very real possibility that this expression of faith might turn into an albatross, as it has for so many of today's homeowners and former homeowners.

As we already know, the Federal Reserve made some policy changes at its last meeting, including Operation Twist (swapping holdings of short-term debt for long-term) and also a new mortgage-support portion of the program. The minutes of that meeting were released this week and it is clear from them that there is no universal agreement about how best to support the economy, if at all. A range of options were discussed, including new plans for purchasing Treasuries (QEIII), Operation Twist, and paying banks less on the reserves the Fed itself holds. There are some benefits and pitfalls to all approaches, and the ones with the fewest drawbacks were ultimately selected. The sentiment seems to be that "we'll try these first, and if they don't achieve the desired effect, we can move on to the next."

The commanding officer at the Russian military academy (the equivalent of a 4-star general in the U.S.) gave a lecture on Potential Problems and Military Strategy. At the end of the lecture, he asked for questions.
An officer stood to ask, "Will there be a third world war? And will Russia take part in it?"
The general answered both questions in the affirmative.
Another officer asked, "Who will be the enemy?"
The general replied, "All indications point to China ".
Everyone in the audience was shocked. A third officer remarked, "General, we are a nation of only 150 million, compared to the 1.5 billion Chinese. Can we win at all, or even survive?"
The general answered, "Just think of this a moment: In modern warfare, it is not the quantity of soldiers that matters but the quality of an army's capabilities. For example, in the Middle East there have been wars recently in which 5 million Jews fought against 150 million Arabs; Israel was always victorious."
After a small pause, yet another officer from the back of the auditorium asked, "Do we have enough Jews?"