|
Through the last four weeks, fixed mortgage interest rates stabilized, and then shot up almost half a point (0.41%).
Maybe we are not in a recession right now (defined as two consecutive quarters of negative growth) but as someone recently said, "it feels like we are in a recession." One reason it feels like we are in a recession is that our assets are going down in value at the same time prices are going up.
House prices are going down almost everywhere, especially at some edges of the nation. Inflation equaled 13% in July. If you take out food and energy (which we must all spend money on anyway) the inflation rate was only 3.6%. That's a lot of inflation for the grocery store, the gas station, and for air conditioning.
Moreover, it is an election year, with one side saying that an election for the Republicans is like a third Bush term and the other side saying you cannot depend on the Democrats.
The news media talks about banks like Indy Mac closing and there are constant rumors of additional problems with other banks, usually big mortgage lenders or investors in the secondary mortgage market. The cable news stations have the Dow Jones highlighted and tell us when the stock market falls (and when it rises). They tell us that the President may veto the speculation and regulation bill if it passes because that will just send more business overseas.
Congress passes and the President signs potential rescue operations for Fannie Mae and Freddie Mac. No one talks about the fact that these are mostly for refinances or purchases, not existing loans. They call it a mortgage rescue bill. No one tells you how the mortgage rescue bill has built-in penalties for existing lenders, borrowers, and those who choose to refinance using mortgages insured by Federal Housing Administration.
It sure feels like a recession.
Mortgage interest rates should go down a it, having temporarily over-reacted. I hope that at that time they will stabilize. However, increased regulation in the rescue bill (and inflation) should send rates higher in spite of the slowing economy. It is enough to make it worrisome if things start to speed up, no one can guarantee economic or interest rate predictions, of course.
|
