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Weekly Financial Report About The Economy And Home Buying Or Home Selling

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May 22, 2011 05:33 AM

Weekly Finincial Report About The Economy And Home Buying Or Home Selling

Home Mortgage Interest Rates Holding Steady Around 4.5%

Home Prices Up Over May 2010

The Producer Price Index showed a rise in wholesale inflation with a 6.8% year-over-year inflation rate. While wholesale inflation doesn't always get passed on to the consumer, as evidenced by the relatively benign Consumer Price Index (CPI) inflation readings, at some point one of two things usually happens:

Businesses that are burdened with increased costs must pass the increase to the consumer by raising prices, thus boosting consumer inflation.
If businesses aren’t in a position to raise prices because of weak consumer demand, they must absorb the increased costs...thereby lowering earnings and the ability to expand, thus furthering the present slow economic growth.

Home SOLD prices in the Woodbridge, Manassas, Lorton, and Mount Vernon in May 2011 are up 2%-3% over May 2010.

New home sales in Woodbridge, Manassas, Lorton, and Mount Vernon have skyrocketed way up high over last year's sales thanks to lower land prices.

Builders buy their finished building lots from land developers who clear the land, lay the utilities, and pave the streets.

Land developers have cut prices for land to the bone, and that means new homes are a good value right now.

One of the Fed's goals for its second round of Quantitative Easing (QE2) was to create inflation and avoid deflation in the hopes of strengthening our economic recovery.

It appears that it has been somewhat successful in this goal, as the risks for deflation have abated. If inflation continues to rise, this could hinder further improvement in home loan rates.

Quantitative Easing is a fancy way of saying the treasury is printing more money with nothing of value to back it up. That's why foreign currency exchange rates are so high. British Pounds, Euros, Japanese Yen, and Chinese Yuan can buy more dollars than ever before.

A cheaper dollar is good for exports. US products cost less in the foreign markets, so US exports are up compared to years past.

It’s also important to note that inflation in China is also on the rise, and inflation abroad becomes inflation in the U.S. as we import so many items from China. China's buying of our debt has helped keep our home loan rates relatively low for a long time.

Home loan rates would likely move higher if China were to not only slow buying, but start selling some of their near $900 billion worth of U.S. government debt holdings.