This week, mortgage investors focused on the Fed, inflation, and oil prices. The week started off on a positive note, and mortgage rates fell on Monday and Tuesday. Even higher than expected levels of core inflation in Tuesday’s Producer Price Index had little impact. The atmosphere changed quickly on Wednesday, though, after the release of the FOMC minutes from the April 30 Fed meeting. In the minutes, the Fed lowered its forecast for economic growth in 2008, while raising the expected level of inflation. Also notable, Fed officials ruled out further rate cuts unless the outlook for the economy turns significantly worse. The Fed’s heightened inflation projections were bad news for mortgage markets, and rates ended the week a little higher.
Investors closely watched the continued climb in energy prices during the week. Rising energy prices are particularly bad for the stock market, while the impact on mortgage markets is less clear. In one sense, they act similar to a tax increase, since they result in less disposable income, and economic growth slows. An economist at a major investment bank pegged the added cost this year to US consumers and businesses at $300 billion, more than double the $130 billion in tax rebates being issued by the government. Normally a decline in economic activity reduces future inflationary pressures and is good for mortgage markets. In this case, however, higher energy prices are seen as adding to inflation by more than a slowing economy would reduce it.
In the housing sector, this week’s data was close to the expectations of investors. April Existing Home Sales fell slightly from March, while inventories of unsold homes rose to the highest level since June 1985. Separately, OFHEO, a government agency, announced that US home prices fell 3% during the first quarter compared to the same period one year ago. Prices fell in 43 states. Analysts suggested that the recent difficulty in obtaining jumbo mortgages has led to a smaller proportion of sales of more expensive homes, which has skewed the housing data somewhat lower.
Compliments of Corey Phelps, Front Street Mortgage, (231) 360-7283, email: corey@frontstreetmtg.com
Great post !
Generally it is very intresting kind of investment, but I think that real estate is loosing it’s price too much.
I own a site with prices for Moscow real estate listings and from the begining of this year it wasn’t grew….
Anyway american real estate is more stabil in this case.
Thank you for your post. The real estate market in the US is very local. We are located in Northwestern Michigan and while we have seen better markets, we are in much better shape then the rest of the State of Michigan. Our area is a very desirable area to vacation and live. Buyers are getting excellent deals on waterfront and other properties. Now is the time to buy!