Should We Listen to What the Fed Says?
Rates held steady last week. This means we are still regularly seeing the same low quotes on the 30-year fixed-rate loan that we’ve been seeing. Rates continue to hold near a three-year low.
The rate drop that occurred last month continues to spur demand. The Mortgage Bankers Association reports refinances rose 11% last week compared to the previous week. Purchase applications were up 8% week over week. This was the second-most active week since May 2010.
Such high activity may be in response to pressure building for rates to rise. Commodity prices are again trending higher. Oil, the most valued commodity of them all, is up 17% so far in April. Gold continues to hover near a 52-week high. Rising commodities prices could be a sign of accelerating consumer-price inflation.
Rising oil prices are also impacting stock prices. The S&P 500 Stock Market Index is up 3% over the past 30 days. The index is approaching its all-time high. Oil stocks, which comprise roughly 9% of the S&P’s value, could propel the index even higher. If stocks and commodities continue to rise, and if economic activity continues to generate 200,000 new jobs each month, talk of Federal Reserve interest-rate hikes will also rise. Then you can be sure interest rates will rise too.
A Distant Memory, but Still a Memory
The housing recovery has been nothing short of remarkable. Housing has been the one sector the economy we could point to for reliable growth over the past five years.
With housing prices in the major metropolitan markets continually hitting new highs, and with prices trending higher in many smaller markets, it’s hard to believe that we endured falling prices, a dearth of buyers, and almost non-existent lending less than a decade ago. Here we are today, and things are as good as ever.
It’s worth remembering, though, that “good as ever” doesn’t mean forever. To be sure, we don’t see a return to the 2008-2010 era in our future, but trends – good or bad – don’t last forever. Therefore, it’s usually best to exploit the opportunities during the good times the best that you can.