What In the World Is Going On?
The world is certainly more connected then ever these days, and that's true well beyond the Internet. If you've been wondering what's been going on, and what things mean for home loan rates, here's the scoop.
A Recap of News at Home
First, it's important to remember that when our economy is struggling, our Bond Market usually benefits as investors seek a safe haven for their money. And since home loan rates are tied to Mortgage Bonds, our home loan rates are sometimes at their best when our economy is struggling. In a way it makes sense...in times of economic struggle, good home loan rates can help kick start our economy in other areas.
The housing market is one of the main areas in our economy that is still struggling. New Home Sales, Existing Home Sales and Housing Starts all fell in March. And in April, the Fed noted in its statement from their Federal Open Market Committee (FOMC) meeting that the housing market remains "depressed."
In addition, recent reports in the manufacturing sector were also disappointing, as both the Empire State Manufacturing Index and the Philly Fed Index came in below expectations. The same is true in the labor market, as recent Initial Jobless Claims readings have spiked sharply higher...and well above the 350,000 range seen in recent weeks.
But not all the news has been disappointing: Retail Sales in March rose by a nice 0.8%, as consumers bought all kinds of products across the board. And when stripping out autos, sales still grew. This adds to the increasing trend seen in January and February and is a good sign for our economy, as consumers don't spend when they aren't feeling optimistic about their financial situation.
The direction of economic reports here will certainly impact the markets and home loan rates in the weeks and months ahead, and it's something to watch closely.
News to Note from Overseas
Our Bond Market–and therefore home loan rates–also often benefit when the global economy is struggling, as investors overseas see our Bond Market as an ultra safe haven for their money. This has happened throughout recent months as Greece and several other countries in Europe have been facing a debt crisis. What's more, there is growing and very justified concern about Spain's ability to pay down debt, meet new budget deficit targets, and avoid a bailout or debt restructuring. And let's not forget that besides Spain and Greece, we still have France, Portugal, and Ireland to deal with in future months and years.
There will likely be more safe haven trading into the relative safety of the US Dollar and US Bonds (which will benefit Mortgage Bonds, to which home loan rates are tied) as the uncertainty out of Europe escalates. And more bad economic reports here in the United States could increase trading into the safety of our Bonds, just as more good economic news here would likely benefit Stocks at the expense of our Bonds and home loan rates.
If you have any questions at all about how the news here or abroad might impact your personal situation, you can contact Gary Umholtz at RPM Mortgage (707) 343-9510.