A housing recovery appears to be underway in the U.S., but the market has yet to fully recover with lending still too tight and the rapid pace of refinancings creating backlogs, the Federal Open Market Committee said in its latest meeting minutes. In addition, the minutes show a Fed that is leaning towards more bond buying in the future to juice the economy.

The Fed already enacted another round of QE and is acquiring about $40 billion in agency mortgage-backed securities a month.

"Looking ahead, a number of participants indicated that additional asset purchases would likely be appropriate next year after the conclusion of the maturity extension program in order to achieve a substantial improvement in the labor market," the minutes said.

The committee members generally expect the nation's economic recovery to remain moderate in the coming quarters.

Still, they noted a general sense of optimism around housing with home prices and sales rising along with new construction. However, financial firms remain challenged by a stream of new refinancings that outpace current capacity levels. 

The momentum in housing is generally driven by low interest rates and higher demand, but the market is still below ideal levels, the FOMC meeting minutes suggest.

"These participants also noted that underwriting standards remained quite tight, particularly for borrowers with lower credit quality," the minutes said.

Even though housing consumption and consumer spending showed signs of improvement, the Fed minutes show the committee concerned about slowing activity levels in the business sector.

Manufacturing output showed signs of weakening with reports from the field suggesting slower output and fewer new orders.

Concerns about business spending may be tied to uncertainty around U.S. tax policy and the international economic outlook, especially in Europe, the Fed said.

With the Fed currently keeping interest rates low and partaking in ongoing mortgage-backed securities purchases, the committee remained conflicted on when, or if, it should communicate what factors will lead to a shift in the federal funds rate.

"Several participants were concerned that quantitative thresholds could confuse the public by giving the impression that the FOMC focuses on a small number of economic variables in setting monetary policy, when the committee in fact uses a wide range of information," the FOMC meeting minutes suggested. "Some other participants worried that the public might mistakenly interpret quantitative thresholds as equivalent to the committee’s longer-run objectives or as triggers that, when reached, would prompt an immediate rate increase."