Oil's Well That Ends Well?

Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

Oil's Well That Ends Well?


You know oil prices are low when you do a double take gas station signs at every intersection. The same holds true when half the social media posts you see contain snapshots of what your friends across the nation are paying per gallon!


As we closed out 2014, US consumers did indeed benefit from lower prices at the pump and this provided a welcomed backdrop for holiday travel and discretionary spending. But now, in light of this trend, will it also be important to factor lower oil prices into our interest rate predictions and forecasts for 2015? Most of us are aware that two factors; employment numbers and inflation readings, are likely to have greatest influence on the Federal Reserve’s timing on any interest rate hikes. Though most economists agree that there is no direct correlation between interest rates and oil prices, virtually all would admit now that lower oil prices might well color the inflation and employment data themselves in the months to come. How do we best put this in perspective when we contemplate the timing of a home purchase or refinance?


Oil and inflation. With oil prices down and inflation already exceptionally benign, some may be wondering how the Fed would justify an increase in interest rates, were it to happen. We have two pieces of evidence that might play into their logic. First, Fed Chair Janet Yellen stated in a December news conference that she believes oil’s move lower is "transitory." The Fed then expects oil prices to rise to more normal levels before they confront their decision, which many feel will be in mid- to late-2015. Second, the Fed may be looking more closely at the personal consumption expenditure (PCE) index than the better known consumer price index (CPI). Core PCE, excluding food and fuel, is expected to be up nearly 2%, and in line with Fed targets, in year-over-year estimates from June 2014 to June 2015. So, to summarize, the Fed thinks less about oil’s potential impact on reducing inflation and more about how an improving jobs environment will force employers to offer higher wages, which will in turn put upward price pressure on most goods and services. This brings us to our next point.


Oil and jobs. The Fed firmly believes the employment picture is brightening and if the trend of the last few months holds, few will debate they have a foundation to support their "maximum employment" mandate for setting monetary policy, even if that might include hiking rates. Any increase is expected to be gradual at first, but oil prices can play into this in a number of ways. Those in states like Texas, where oil production employs many people, would likely see layoffs if oil prices remained low. And those in states where burgeoning industries such as renewable and alternative energy have brought welcomed increases in jobs and technology could see a pullback in spending and employment should cheaper oil persist. Old habits die hard, and fossil fuels have certainly been one of toughest for the US to kick.


With no pun intended, what all of this oil speculation really highlights is the reality that any number of complex factors can reenter the mix and change the course of interest rate direction --- no matter how late in the game. As we begin 2015, we must look back at how far we’ve come over the last five years, and while interest rates have been at their historic lows and the Fed funds rate has been at near-zero levels. Nobody expected rates to stay this low this long, but they have, and the housing market has made great strides in its recovery as a result. Might the first quarter of 2015 be the last opportunity to take advantage of that on the purchase or refinance side? And let’s not forget home values themselves --- and how much better most fare than just five years ago. The median home price in California as of November, 2008, was $288,000. That same home today would have a statistical value of $445,000, reinforcing the long term trend we know all too well --- real estate has proven to be a great investment over time.



So with a full tank of gas, we begin down the road of the New Year. While we don’t yet know the final destination, we can appreciate that we still have a great opportunity before us with mortgage programs and pricing. Call me today if I can help you with your journey.


Happy Motoring,



Rob Spinosa
Mortgage Loan Originator
NMLS: 22343 CalBRE: 01297944
Cell: 415-367-5959 Fax: 415-366-1590
rspinosa@rpm-mtg.com www.rpm-mtg.com/rspinosa 
1058 Redwood Highway, Frontage Road, Mill Valley, CA 94941


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RPM Mortgage, Inc. – NMLS#9472 – Licensed by the Department of Business Oversight under the Residential Mortgage Lending Act. Equal Housing Opportunity.





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Lynn B. Friedman
Atlanta Homes ODAT Realty Call/Text 404-939-2727 Buckhead - Midtown - Westside -- and more ... - Atlanta, GA
Concierge Service for Our Atlanta Sellers & Buyers

Rob Spinosa 
The ripple effect of lower oil prices is going to be significant - IMHO. Getting a mortgage/refinance now may be a good decision. The rates look good and no one knows what the full effect will be.

Will the entire world-wide economy suffer? Guess we will have to wait and see what happens.
Have a happy day -

Jan 06, 2015 09:21 PM #1
Katina Hargrove 352-551-0308
Stake Your Land Realty, Inc. - Eustis, FL
Broker/Owner, GRI,SFR, REALTOR®

Good morning Rob,

Yes, my son from Tampa keeps me up to date on the prices of gas. Just last week he said it was down to $1.92 per gallon, here in Lake County it is still at $2.34.  As we have seen the prices drop, we get the sense that something else is going to change.

Jan 06, 2015 09:25 PM #2
Rob Spinosa
Guaranteed Rate, Marin County, CA - San Anselmo, CA
SVP of Mortgage Lending, Marin County

Lynn B. Friedman, even since I worked on this piece late last week and over the weekend, the market developments have been startling.  Oil's drop is nice in the sense that when we fill our tanks, the sting is less severe, but there is another side to that coin, and the point of my post is to just make everyone aware that the components of our economy are all intrinsically tied.  One move cannot happen in a vacuum.  Right now, rates are great.  My advice to all is to take advantage of it.  Don't wait if the opportunity presents, and don't try to outsmart the market either.

Thanks for the support and comments!

Jan 06, 2015 09:26 PM #3
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

Just hoping that these lower prices last.  My guess is that by summer prices will be back up there.  The oil companies just cannot stand being forced to give us a break. 

Jan 06, 2015 10:29 PM #4
Winston Heverly
Winston Realty, Inc. - Atlantis, FL

Enjoy it while you can, the drop in fuel is not going to end well. The fed will continue printing money, to artificial prop up a bad economy. With rates at zero, where do you go from here.


click here for the latest prediction

Jan 06, 2015 11:13 PM #5
Nicole Doty - Gilbert Real Estate Expert
Zion Realty - Gilbert, AZ
Broker/Owner of Zion Realty ZionRealtyAZ.com

I know the Feds keep trying to paint a rosey picture of the jobs market but if the employment data were true, why are there still a record number of Americans unemployed and on government assistance? I'm not buying what they're trying to sell. 

Jan 07, 2015 12:15 AM #6
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

Rob, there are many factors that are considered. I'm thankful that I completed a refinance in October 2014 and was able to take advantage of the lower rates and the equity gained in my home that allowed me to combine two loans into one.

Jan 07, 2015 12:29 AM #7
Anna Banana Kruchten CRS CRB, Phoenix Broker
HomeSmart Real Estate BR030809000 - Phoenix, AZ

Rob tt's been interesting listening to the financial guru's regarding the  stock market dip and lower oil prices. Some say they have nothing to do with each  other, others are spitting oil tacs and predicating all kinds of peril.  I for one think it's going to continue to even out and this is just a dip in circumstances. No pun intended.

Jan 07, 2015 02:26 AM #8
Rob Spinosa
Guaranteed Rate, Marin County, CA - San Anselmo, CA
SVP of Mortgage Lending, Marin County

Anna Banana Kruchten, at least when you have diversity of opinion, you avoid the dreaded "When all the experts agree, something else is inevitably bound to happen" argument!


Jan 07, 2015 02:31 AM #9
Rob Spinosa
Guaranteed Rate, Marin County, CA - San Anselmo, CA
SVP of Mortgage Lending, Marin County

Kathleen Daniels , wise to have refinanced when you did.  If things get better from here, well fine.  You make another decision from a strong place.  If you attempt to time the market and lose, you make no decision from a bad place.  This simple logic gets lost on too many.  

Jan 07, 2015 02:34 AM #10
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

Living in Hawaii we can sure appreciate the lower gas prices. Having Costco makes a huge difference here too, with prices $1 lower than at the regular stations.

Jan 08, 2015 05:20 AM #11
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Rob Spinosa

SVP of Mortgage Lending, Marin County
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