Can Lipstick Avert A Crisis?

Weekly Update:  October 28, 2011

We are running in place.  U.S. growth for the 3^rd quarter came in at 2.5%.  That is just enough to accommodate the new young adults joining the workforce but not enough to push down unemployment.  Still, it’s better than falling off the treadmill.  The Personal Consumption Index is ‘running in place’ as well with inflation coming in basically flat. 

This, and the weak U.S. economy, continue to hold rates down.

The main factor impacting rates (and the stock market) recently are the ebbs and flows in Europe.  For  the past 2 months, when investors feared a European crisis was at hand, rates dropped into the 3’s.  As the panic went away, rates went back up into the 4’s.  This week fears waned as the European community agreed to allow Greece to pay back only ½ of what they owe.  Sounds like a default to me, but it’s not called that because the banks that hold the debt agreed to the ‘hair cut’.  A pig is still a pig, even with lipstick, but if the lipstick averts a crisis, I’m all for it.  As long as we stay out of the ‘crisis zone’ you won’t see rates drop back into the 3’s.  Let you clients know this so that they don’t keep sitting on the fence waiting for something to happen that might not happen.

This week Freddie Mac’s 30 yr. fixed rate survey remained 4.1% with fees and assuming good credit. 

Starkey Mortgage is an Equal Housing Lender.

The views expressed are those of the author and do not represent Starkey Mortgage