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QE3 Won’t Do ‘Much At All’ For Real Estate: Citi Exec

Javier E. David|Special to CNBC.com
Thursday, 27 Sep 2012 | 5:00 PM ET

The mortgage bond-buying spree the Federal Reserve is expected to embark upon won’t do “very much at all” to boost a housing market that only recently began to pull out of depression territory, a top Citigroup executive said Thursday.

Markets observers have debated whether the Fed’s quantitative easing, or QE3, will have a meaningful impact on a faltering U.S. economy.

Yet Thomas Flexner, global head of real estate at Citigroup, told CNBC’s “Fast Money” that while the home sector is “generally off the bottom,” theFed’s $80 billion a month in mortgage bond purchases may have little impact on the market. (Read more: Investors Warned: Step Away From the Kool-Aid)

“I don't think that QE3 is going to do very much at all, other than keep interest rates low,” Flexner said. “There’s been no evidence that QE3 is actually going to make its way into the real economy and lift fundamentals.”

Climbing the Property Ladder
CNBC's Bertha Coombs looks at pending home sales and a rally in homebuilders due to a shortage of homes at the lower end. Thomas Flexner, Citi Institutional Clients Group Management Committee member, says it's difficult for many to qualify for mortgages.

Flexner explained that low interest rates, while generally helpful to businesses and consumers, won’t have the desired impact on home buying because lending standards have been tightened since the 2008 financial crisis.

As a result, “credit criteria for new mortgages is more difficult today than it used to be, so the normal person can't automatically go out and get a 70 percent or 80 percent loan on the value of the mortgage,” the Citi executive said.

Meanwhile, the rock-bottom interest rates provided by the Fed’s ultra-loose monetary policy are encouraging lending institutions to hold on to money rather than lend it out at a premium.

“This is much more of a long-term deleveraging debt cycle where the price of money is not really the arbiter of what happens long-term,” Flexner said.

“That is why I think we're finding that…so much of that capital [companies are] spending is going back into the Fed in the form of excess reserves. It's not getting lent because loan demand is not there.”

Trader disclosure: On Sept. 27, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s “Fast Money” were owned by the “Fast Money” traders: Steve Weiss is long TOT; Steve Weiss is long HK; Steve Weiss is long QCOM; Steve Weiss is long AIG; Steve Weiss is long M; Steve Weiss is long WLP; Steve Weiss is long VZ; Steve Weiss is long VOD; Steve Weiss is long T; Steve Weiss is long CLNY; Steve Weiss is long AMTG; Steve Weiss is long MTGE; Steve Weiss is long BAC; Steve Weiss is long EUO; Steve Weiss is short VALE; Steve Weiss is short BHP; Steve Weiss is short RIO; Steve Weiss is short GOOG PUTS; Steve Weiss is short AAPL PUTS; Steve Weiss is short AKS; Stephanie Link is long AAPL; Stephanie Link is long JPM; Stephanie Link is long SBUX; Jon Najarian is long call spreads in AAPL; Jon Najarian is long call spreads in GS; Jon Najarian is long call spreads in JPM; Jon Najarian is long call spreads in YHOO; Jon Najarian is long call spreads in SBUX; Jon Najarian is long call spreads in FB; Jon Najarian is long call spreads in GOOG; Jon Najarian is long call spreads in HLF; Jon Najarian is long call spreads in DECK; Jon Najarian is long call spreads in TEX; Jon Najarian is long GLUU; Jon Najarian is long CME; Jon Najarian is long CBOE; Jon Najarian is long STSI; Mike Murphy is long AAPL; Mike Murphy is long WFC; Mike Murphy is long TGT; Mike Murphy is long TWI.

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