Mortgage Rates: Relative versus Absolute
When my daughter was growing up I tried to impress on her the importance of understanding the difference between relative and absolute. Here’s an example: the forecast for next week’s snowstorm (as of Friday) was for 7 inches of snow. On a relative basis, after about 15 inches this week, that will be much better. But on an absolute basis it will still be a pain.
My attention was grabbed by an email I received yesterday with the headline: “Mortgage rates hit 5 week low.” Ignoring the fact that I can’t actually find the source for the claim (I am sure it exists) let’s look at the rate that I use most often in my articles about mortgage rates: the Freddie Mac weekly survey. Here’s a chart of the weekly rate this year:
Freddie Mac weekly survey
While a different source may have different actual numbers, it is pretty obvious that, while rates may be relatively lower this week, in absolute terms they are still about 0.5% higher than they were at the start of the year.
Mortgage rates, closely following the yield on the US 10 year Treasury as they do, often move quite sharply – up or down – over a short period of time. And whenever this move is upward a number of commentators, relishing their 15 minutes of fame, rush out statements claiming that the increased rate will have a negative impact on housing prices as homes become less affordable.
There are many factors in the decision to buy a home (rising income and optimism about the future are two that seem to get less attention than mortgage rates), but let me show a chart showing the history of the FRM for the last 40 years. The chart is not very clear when reproduced, but the message is that it is only in recent years that mortgage rates have dropped below 5%.
A year ago the FRM was 4.3%, which happened to be the highest rate for the year. And a year ago the yield on 10T was 2.6%, also the highest rate for the year. Several commentators have forecast this week that the yield on 10T may have peaked for this year when it reached 2.94% in February.
In my recent article What will happen to Home Prices in the Experimental Economy? I wrote: “Whether or not inflation does increase beyond the Fed’s 2% target, there is going to be a major increase in the amount of Treasuries that need to be sold this year to finance the sharply increased budget deficit. And this will occur when the Fed has switched from being a buyer of Treasuries to a seller, and when the projected weakness of the dollar makes buying anything in the US less attractive to foreign investors. If the supply increases and demand decreases, then prices should go down – which in bond markets means higher interest rates.”
Commentators suggest some of this effect may have been behind the recent rise in yields.
But enough. I hope this article and the others to which there are links give some perspective on recent moves in mortgage rates – which in absolute terms remain attractive.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, please contact Andrew Oliver on 617.834.8205 or Kathleen Murphy on 603.498.6817.
If you are looking to buy, we will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Are you thinking about selling? Read Which broker should I choose to sell my house?
Andrew Oliver and Kathleen Murphy are Realtors with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
What will happen to Home Prices in the Experimental Economy?
(Click here to download a pdf of this report.)
This article is a follow up to my Why have mortgage rates spiked? article published two weeks ago, and sets out some thoughts about the outlook for residential real estate as we enter an Experimental Economy.
What is an Experimental Economy?
Let’s try to compare the economy in a recession to a car pulling a trailer, with a full load of passengers, while going uphill. What does the driver do? To offset the gradient and the weight being pulled, she pushes on the accelerator pedal, the extra effort allowing her to maintain speed. And when she gets to the top of the hill? She eases off the pedal so that she can avoid speeding and the risk of losing control.
Now, let’s look at the economy. As we emerged from The Great Recession, the Federal Reserve (Fed), understanding that the economy was facing a sharp incline, had its foot hard down on the accelerator (cheap and plentiful money), dragging the car (economy) with its trailer (unemployment) up the incline.
After an initial period, the car slowly regained its speed and as it neared the top of the hill the driver started to ease off on the accelerator (raising interest rates and buying fewer Government securities – Treasuries).
And then, the car reached the top of the hill (historically low levels of unemployment, an economy growing steadily). So, what does the driver do now? Well, based upon historical evidence, the driver (Fed) raises interest rates, while the Government tries to run a budget surplus to squirrel away funds for the next recession.
The Fed has done its part, but the Government, as in Congress, has decided that it is time for an Experimental Economy. Instead of taking the foot off the accelerator, Congress has passed a series of tax cuts and spending increases which will more than double the Budget Deficit. Rather than easing up on the accelerator, Congress has decided to push its foot down even harder.
I call what we are entering now the Experimental Economy, the experiment being that we are betting that the tax cuts and spending increases will lead to faster economic growth, which in turn will reduce the budget deficit.
It’s different this time because….
During periods of strong movement, either up or down, whether in stock markets or economies, one frequently hears pundits explaining why “this time it is different.”
During the yearly years of Quantitative Easing (monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply) many economists forecast that such an unprecedented increase in the money supply would inevitably lead to renewed inflation.
That did not happen for a variety of reasons: the depth of the recession in the US and the longer recession in Europe, the emergence of the US as the world’s largest oil producer. The result was that the longer that inflation did not recur the more the experts claimed that “this time it’s different.”
But, as Winston Churchill said: “Those who fail to learn from history are condemned to repeat it.”
What could go wrong with the Experimental Economy
Those who are predicting that strong growth will follow from the major stimulus to the economy may be proved right. If not, the risk is that stimulating the economy at a time of full employment will cause the Fed to raise interest rates aggressively and choke off the hoped for economic growth.
If you have been watching the Olympics, you may have seen the bobsleigh or bobsled events. Stepping on the gas at the top of the economic hill might be compared to jumping in a bobsleigh and hurtling down the track.
In this photo of a 4 man team, the man at the back – the brakeman – appears to have his head down, as if in prayer. I am wondering if he is the Federal Reserve Chairman who has just been told that Congress has passed another spending bill.
At least the traditional bobsleigh has a sold frame, with a driver and brakeman. Let’s hope the economy resembles the 4 man bob rather than the skeleton bobsleigh below.
Why Treasury yields may continue to rise
I have written many times in recent years that the law of supply and demand has applied to home prices, in comments like: “economic growth, low interest rates, strong demand and low supply will lead to higher prices.”
Whether or not inflation does increase beyond the Fed’s 2% target, there is going to be a major increase in the amount of Treasuries that need to be sold this year to finance the sharply increased budget deficit. And this will occur when the Fed has switched from being a buyer of Treasuries to a seller, and when the projected weakness of the dollar makes buying anything in the US less attractive to foreign investors.
If the supply increases and demand decreases, then prices should go down – which in bond markets means higher interest rates.
What will happen to residential real estate prices
While many commentators have expressed the hope that rising interest rates might slow the demand for real estate, there is a converse argument that recent tax changes may encourage people to stay in their existing homes. A longer-term encouraging sign is the recent sharp increase in both housing starts and building permits, but in the short-term demand seems set to continue to outstrip supply.
And historically, real assets like homes have benefited in times of inflation.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, please contact Andrew Oliver on 617.834.8205 or Kathleen Murphy on 603.498.6817.
If you are looking to buy, we will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Are you thinking about selling? Read Which broker should I choose to sell my house?
Andrew Oliver and Kathleen Murphy are Realtors with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
Why have mortgage rates spiked?
(Click here to download a pdf of this report.)
While the Freddie Mac weekly survey for the 30 year Fixed Rate Mortgage (FRM) this week showed an increase of just 0.07% to 4.22%, that survey was based upon rates in the early part of a week which saw a major upward move in the yield on the US 10 year Treasury (10T). As regular readers of this blog know, the rate of the FRM is closely tied to the yield on 10T. Here is a recent chart of the 10T.
The yield on 10T started 2017 at 2.45% and ended it at 2.40%, but in 2018 it has jumped, in just five weeks, to 2.84%.
It is likely that the coming week will see Freddie Mac’s survey number come in close to 4.5%, after spending most of 2017 under 4%.
Why has the yield on 10T – and hence the rate of the FRM – suddenly spiked?
I’ll answer that with bullet points:
1. 10T reflects economic activity and expectations and the economy has been growing quite rapidly and now is being boosted by significant tax cuts.
2. Those tax cuts will add $1.5 trillion to the budget deficit, a sum that will need to be financed largely by selling Treasuries.
3. Historically low unemployment levels have not translated into higher wages – until now, with the annual increase reaching 3%.
4. The seeming lack of wage pressure led many to believe that inflation had been contained, and that the old economic belief that easy money would lead to higher inflation no longer held true. That complacency has been rudely shaken in the last few weeks.
5. After many years when the Federal Reserve was a major buyer of Treasuries, it is now a seller and increased its pace of sales in January.
6. In 2018 the Treasury will be increasing the amount it will be raising at a time when one of the major buyers – the Federal Reserve – has reversed direction.
7. For the first time in a long while, Europe is showing economic growth at the same time as the US, and the European Central Bank has also started to reduce its buying of Government Securities.
8. The dollar has been very weak in recent months, something which does not encourage foreign buying of US Treasuries.
The Federal Reserve has the twin mandates of maximizing employment and stabilizing prices, although recently the Fed has said it wants to see inflation of 2%. The Fed has already increased short-term rates 5 times and has forecast 3 more rate increases for 2018.
All in all, there is quite suddenly a lot of uncertainty and concern creeping into markets, as we saw with the sharp sell off in the stock market on Friday. In today’s world events can move very quickly, as we have seen with interest rates in 2018. Barring an unforeseen event which causes an economic slow down, it does seem that the era of easy and cheap money has ended.
For more detail about the impact of interest rates on mortgage rates read Why mortgage rates may be headed upwards – finally which I published last October.
Why mortgage rates may be headed upwards – finally
At my son’s wedding recently, his father-in-law said “I used to be a banker, but I’m better now.” In similar vein, I confess that I have a degree in economics from Oxford, although in self-defense I should add that the degree also included philosophy and politics. Or maybe that is not a defense.
As this blog is dedicated to helping people understand as much as possible about factors affecting real estate markets I write from time to time about mortgage rates. The key to understanding where mortgage rates are headed is to know that the price of the 30-year Fixed Rate Mortgage (FRM) is based on the yield on the US Government’s 10-year Treasury Note (10T) – and that yield is set by the bond market, not by the Federal Reserve.
Rather than explain this in more detail here I will link to two articles I have written in the recent past: Are mortgage rates going to 5%? and Why have Mortgage Rates dropped below 4%? and show two charts.
The first chart shows the course of rates over the last two years. The Fed Funds rate is the one announced by the Federal Reserve and affects short-term interest rates for items such as credit cards, auto loans and adjustable rate mortgages. Note that while the FF rate has moved up steadily, the yield on 10T spiked after the 2016 Election, trended down during the spring and summer months, and has recently moved up again. This chart clearly shows that there is no link between FF and FRM.
The second chart shows the difference between the 30-year Fixed Rate Mortgage and 10T. The numbers shown for 2013-2016 are averages for the entire years; the data for 2017 is the spread on those days. Note how consistent the spread has been at +/- 1.7%. And note that the current spread is below 1.5%, suggesting that the FRM is about to increase.
Why the FRM may rise in 2018
Behind all the political drama, the US economy does seem to have gathered strength in recent months, with back to back quarters showing 3% GDP growth. It seems likely that Congress will pass some measure of tax cuts and it appears that businesses have started to invest more. Inflation is below the Fed’s target but is also picking up, while unemployment, as officially measured, is extremely low. All these factors suggest that the yield on 10T may continue to increase and that in turn will lead to an increase in the FRM.
Why the FRM may not rise in 2018
In one word, Amazon. OK, I am exaggerating, but I remember some 20 years or so the famed economist, Brian Reading, explained to me why he believed inflation was no longer a threat in the US. He called it the Marshall’s effect – Never, Never, Never pay Full Price. Consumers learned to shop around and find the cheapest source – and, of course, the internet helped that process.
Back to Amazon. Recently, it bought Whole Foods and seemingly has plans to shake up the grocery market.What if Amazon decides to get into the health care market? Of is somebody else does. Disruption has occurred in many industries over the last decade – but not in health care, which represents nearly 20% of GDP.
All the focus in healthcare has been on extending coverage but much less focus has been on controlling costs. Maybe that will change.
But probably not in 2018, so at the moment it does seem likely that mortgage rates will follow the 10T and see an increase in 2018.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, please contact Andrew Oliver on 617.834.8205 or Kathleen Murphy on 603.498.6817.
If you are looking to buy, we will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Are you thinking about selling? Read Which broker should I choose to sell my house?
Andrew Oliver and Kathleen Murphy are Realtors with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
Are mortgage rates going to 5%?
I read this comment recently: “Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have hovered around 4%. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison, projecting that rates will increase by this time next year.”
The Mortgage Bankers Association (MBA) is the United States national association representing some 2,200 companies involved in mortgage finance. MBA produces monthly forecasts of, among other things, the 30 year Fixed Rate Mortgage (FRM) rate. With their knowledge base, it might be reasonable to expect their forecasts to be quite accurate, so let’s look at their forecasts in recent years. In particular, I want to look at their forecasts for the year after the one in which the forecast was made.
2014
Throughout 2014 MBA expected the 2015 FRM to be over 5%. It was 4.0%.
Source:MBA
2015
Throughout 2015 the MBA expected the 2016 FRM to be well over 5% (are you seeing a pattern here?) It was 3.8%.
Source:MBA
2016
At the start of 2016 the MBA expected the 2017 FRM to be over 5%, but by July had lowered the forecast to 4.4%.
Source:MBA
2017
At the start of 2017 the MBA forecast the 2018 FRM to be – yes, over 5%. By July the forecast had dropped to 4.9%, a level maintained in its September forecast just published.
Source: MBA
How were the current year forecasts?
As I have pointed out many times in my articles on mortgage rate, forecasting the future is….. complicated. And like hurricane forecasts, the further out the prediction, the greater is the likely margin of error. But MBA has not done much better with its current year forecasts, as can be seen in the tables. Its over-estimate at the beginning of the year was 1.1% in 2014, 0.9% in 2015 and 0.8% in 2016. And rates will have to jump before the end of the year if 2017 is to be any better, as the current rate is 0.9% below the MBA forecast in January.
Why has MBA been so wrong?
The FRM rate is based upon a margin over the yield on the US Treasury 10 year note (10T). In recent years that margin has averaged 1.7%. In general, the yield on 10T reflects economic performance and expectation. And many economists, not just MBA’s, have been forecasting that, with all the financial stimulus injected in recent years, inflation would pick up as the economic expansion created more demand for goods and workers. And higher inflation would lead to higher interest rates being demanded by buyers of fixed income securities such as 10T.
I have written many articles since the Federal Reserve started increasing short-term interest rates in December 2015 pointing out that the Fed Funds rate influences things like auto loans, credit card rates and adjustable rate mortgages, but that the FRM follows 10T.
What will happen to mortgage rates in 2018?
The point of this post is not to point fun at MBA’s economists and neither is it to make a forecast for 2018. It is to point out, once again,that home buyers should be focused on finding the right house – a difficult enough task with today’s lack of inventory- rather than mortgage rates. And as a mortgage broker friend pointed out to me, anybody who could refinance in recent years has already done so to lock in recent low rates.
The key to knowing what will happen to the FRM is to follow one number – the yield on 10T.
Are you thinking about selling? Read Which broker should I choose to sell my house?
Please contact me on 617.834.8205 or [email protected] for a free market analysis and explanation of the outstanding marketing program I offer
If you are looking to buy, I will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
What does Federal Reserve rate increase mean for Mortgage Rates?
For the fourth time in the last 18 months the Federal Reserve increased short-term interest rates by 0.25% this week, bringing the total increase over this period to 1.00%.
After each increase in the Fed Funds rate (FF), I point out that the FF does not directly affect the 30 year Fixed Rate Mortgage rate (FRM), whose price is more closely related to the yield on the US 10 year Treasury (10T).
Let me illustrate this point in one chart:
Source: US Treasury, Freddie Mac
Freddie Mac rediscovers link between Mortgage Rates and Treasury Yields
The 30 year Fixed Rate Mortgage, as reported by Freddie Mac, dropped to 4.23% this week. In a statement Freddie’s chief economist wrote: “The 10-year Treasury yield fell about 10 basis points this week. The 30-year mortgage rate moved with Treasury yields and dropped 7 basis points to 4.23 percent.”
Just four weeks ago the same economist wrote: “This week’s survey once again displays the disconnect between mortgage rates and Treasury yields.”
My article Lies, damned lies and statistics*: mortgage rates demonstrates the very clear correlation between mortgage rates and the yield on 10 year Treasuries and provides a quick way to know where mortgage rates are headed.
If you are looking to buy, I will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Are you thinking about selling? Read Which broker should I choose to sell my house?
Please contact me on 617.834.8205 or [email protected] for a free market analysis and explanation of the outstanding marketing program I offer
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
Mortgage rates set to rise again
The Freddie Mac weekly 30 year Fixed Rate Mortgage (FRM) report showed a further drop to 4.09% this week, but this number does not reflect the increase in interest rates late in the week (the Freddie Mac survey is based on mortgage rates from Monday to Wednesday each week and is published on Thursdays).
How has the mortgage rate moved recently?
The FRM moves most closely with the yield on the 10 year Treasury note (10T). Over the last 4 years the average spread – the difference between the FRM rate and the 10T yield – has averaged around 1.7%. Let’s see how the two rates have moved since the Election: (more…)
Mortgage Rates continue to rise – is this the peak for now?
As expected, mortgage rates increased again this week, reaching 4.3%, a level not seen since….as recently as April, 2014. (more…)
Mortgage rate outlook after Federal Reserve increases rates
For the second time since the introduction of the iPhone (the first was in December 2015) the Federal Reserve (Fed) increased interest rates this week. The increase, like last year’s, was 1/4%. What does this mean for mortgage rates? The key is to understand which rates are impacted by the Fed Funds rate and which are dependent upon interest rates set by the market.
Which rates are based upon the Fed Funds rate?
30 year fixed rate mortgages (FRN) are not based on the FF rate, but are most closely tied to the yield on 10 year US Treasuries(10T). More on that in a minute. (more…)
One reason mortgage rates won’t go up this week
With the near certainty that the Federal Reserve (Fed) will vote to increase interest rates this week, many people assume that mortgage rates will automatically follow. Not so. At least not directly. The Federal Reserve’s decision on interest rates will have no direct impact on fixed rate mortgage rates.
The last time the Fed raised interest rates was just a year ago and at that time I wrote What the Fed’s rate increase means for mortgage rates.
I will update the report after the Fed’s decision on Wednesday. (more…)
Why the Election drove Mortgage Rates up
30 year Fixed Rate Mortgage (FRN) rates are tied to the yield on the US Treasury 10 year note (10T). The spread – the difference between the two rates – has averaged 1.71% since the beginning of 2013, as shown in this chart (the sharp drop at the end reflects the first couple of days after the Election):
Source:US Treasury, Freddie Mac
Now let’s look at what has happened in the month since the Election – after the initial drop the spread has returned to its 4 year average: (more…)
Mortgage Rates: Keep Calm and Carry On
Last week in my report Mortgage rates drop again – where next? I showed the historical relationship between the yield on the US 10 year Treasury (10T) and the 30 year Fixed rate Mortgage (FRM), and said there were two reasons I did not expect the FRM to drop as far as that relationship would imply: the safe haven status of 10T,which caused strong buying of Treasuries, and the desire by banks to boost their profit margins.
This week, as markets decided to
we saw the yield on the 10T drop quite sharply, but little change in the FRM.
What happened?
In simple terms, as the fear factor receded, so did buying of 10T as a safe haven. In fact, 10T saw selling and the yield increased from 1.37% last week to 1.56% this week. With the FRM at 3.42%, up slightly from 3.41% last week, the spread – or difference between the two – dropped from over 2% to under 1.9%.
Where are mortgage rates headed?
While the spread between 10T and FRM is still higher than the average of around 1.7% in recent years, two other factors – the desire by banks to increase profits where they can in a low-interest rate environment, and the absence of buying of Mortgage-Backed Securities (MBS)* by the Federal Reserve – suggest that mortgage rates may well stabilize around these levels for the forseeable future.
*Conventional mortgages are placed into pools and sold to investors as MBS. The yield investors require is based upon the yield on the 10T, but in recent years the Federal Reserve was also an active buyer of MBS. This buying had the effect of driving down the yield asked for MBS and hence kept mortgage rates low. The Federal Reserve ended its direct MBS buying program in late 2014. (more…)
What Brexit means for the housing market
I am an Englishman and my daughter is a currency analyst in London so it has been an exciting few days in this family!
The immediate response to Brexit was the usual flight to safe havens – including the US dollar and US Treasuries. Since 30 year Fixed Rate Mortgages (FRM) are priced off the yield on the 10 year US Treasury, mortgage rates eased on Friday and are likely to continue at current low levels or go even lower.
I am written consistently over the last year that I have not understood the arguments that the Federal Reserve has been using to justify its intention of raising short-term interest rates (which affect things like credit card and auto loan rates, but not FRM rates), while pointing out that the Fed waited too long before raising rates last December and spent too much time telling the world its every thought on the matter.
In fact, the Fed’ s behaviour reminded me of that great line in The Good, the Bad and the Ugly, when Eli Wallach shoots the man who is explaining at length all he has gone through learning to shoot with his left hand: “When you have to shoot, shoot, don’t talk.”
So what now? The relevant factor for the housing market is that the vote by the UK to leave the EU should end any discussion about interest rates rising in the US. And however much the Fed claims to be apolitical, it is very unlikely it will raise interest rates as we get closer to the election in November. In fact, it is possible that following Brexit we will see moves to lower interest rates elsewhere and the pressure may build for the US to lower rates again. Thus, today’s very low mortgage rates are not going away any time soon.
If you are considering selling your home please contact me on 617.834.8205 or [email protected] for a free market analysis and explanation of the outstanding marketing program I offer.
Read Which broker should I choose to sell my house?
If you are looking to buy, I will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
Mortgage rates drop again
As the yield on the 10 year US Treasury continues to drop, so do mortgage rates, which are now around 3.5% and very close to the all-time lows of 2013.
I last wrote on mortgage rates in May in a post Mortgage rates still headed lower and I post an extract from that article below. This week the Federal Reserve once again indicated less enthusiasm for raising short-term rates for a number of reasons. One the Fed did not mention – and neither did any commentator I read – is the impact the November Election is having on the economy.
It seems pretty obvious to me that the possibility of a giant step into the unknown and unpredictable must, at some point, have an impact on investment decisions, thereby causing some slowing in economic activity.
Why are the “experts” so wrong?
The FRM is based, not on short-term interest rates over which the Federal Reserve has influence, but on the yield on the 10 year US Treasury (10T), whose price is influenced by a number of factors, notably the anticipated strength of the economy, yields compared with other countries, and geopolitical developments around the world.
When the Fed increased short-term rates last December, the yield on the 10T was 2.25%. On Friday it closed at 1.6%, a drop of 0.65%. In the same period, the FRM has dropped just 0.4%.
The reason the Mortgage Bankers Association keeps getting the forecast for the FRM so wrong is that it keeps forecasting that the yield on the 10T is going to increase. Its latest FRM forecast – published in May – assumes a 10T yield of 2.2% by the end of 2016 and 2.9% by the end of 2017. These forecast rates have dropped from 2.7% and 3.3% just since January.
But it is not just the MBA that gets interest rates wrong. The Fed was so concerned about being “transparent” and explaining, ad nauseam, its thinking on interest rates in order not to “surprise” the market, that it missed the opportunity to raise rates when the US economy was strong and did so just as it became apparent that the continued weakness in the rest of the world was leading to lower interest rates elsewhere, not higher.
Interest rates have long been higher in the US than in most of the rest of the world, leading to demand for US Treasuries from overseas and causing the dollar to strengthen dramatically.
In my comment on the Fed’s increase in December I wrote: “If commodity prices remain weak, there will be a significant deflationary impact felt in several countries; China’s slowdown could continue to be a drag; and of course there is always the risk of a major war or confrontation. The US economy is doing quite well, but will not be immune to what is happening elsewhere in the world.”
If you are considering selling your home please contact me on 617.834.8205 or [email protected] for a free market analysis and explanation of the outstanding marketing program I offer.
Read Which broker should I choose to sell my house?
If you are looking to buy, I will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests.
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
@OliverReports
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