Weekly Economic Summary From The Cascade Team (October 24, 2012)

Posted by The Cascade Team Real Estate on Wednesday, October 24th, 2012 at 8:39am

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October 24, 2012

Last week in review (October 15 - 19, 2012)

Last week, several reports brought some surprising good news to the markets. Read on for details and what they mean for home loan rates.


Table source: Mortgage Success Source


There were two pieces of good news on the housing front, as housing starts increased 15% in September to their fastest pace in more than four years. Building permits, a sign of future construction, increased by more than 11%, also above expectations. These are both signs that the housing sector’s recovery is gaining some momentum. Also last week, retail sales and the Philadelphia Fed Index, which measures manufacturing in that region, were both reported better than expected. But there was some disappointing news on the manufacturing front, as the New York State Manufacturing Report was lower than expected.

Remember, strong economic news often causes money to flow out of bonds and into stocks, as investors hope to take advantage of gains. That's partly what caused bonds (including mortgage bonds, to which home loan rates are tied) to worsen last week.

Also weighing on bonds and home loan rates was the news that both the headline Consumer Price Index (CPI) and the more closely watched Core CPI (which strips out volatile food and energy prices) were reported a bit more volatile than expected. One of the main goals of the Fed’s latest round of bond buying (known as Quantitative Easing or QE3) is to avoid deflation and actually create inflation. As we saw last week, any hints of inflation can put off bond investors causing both bonds and home loan rates to worsen as inflation can reduce the value of fixed investments like bonds.

The turmoil in Europe is another key story to monitor. Leaders exited a summit in Brussels without concrete measures and details to solve the debt crisis, now into its fourth year.

What does all of this mean for home loan rates? The continued drama in Europe should benefit our bond markets (and thus home loan rates), as investors continue to see our bonds as a safe haven for their money. However, if inflation continues to heat up, bonds and home loan rates could worsen as a result.

The bottom line is that home loan rates remain near historic lows, making now a great time to consider a home purchase or refinance.

In the news this week (October 22 - 26, 2012)


Table Source: Mortgage Success Source

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