Uncertainty in the economy
Uncertainty. We all experience it and typically dont like it. This is especially true when the uncertainty has to do with our finances. The hardest part of a good loan officers job is uncertainty in the economy. Its easy to say where interest rates are going when the economy and the Federal Reserve Board are in a rate-tightening (increasing interest rates) or rate-loosening (decreasing interest rates) cycle. Those are the economic cycles that are easy to forecast and advise upon. Unfortunately, the economy is uncertain right now. Interest rates for the most part are remaining within their current range, but where are they going (because this does affect us all)? As I have noted in previous articles, the Federal Reserve ended its cycle of raising short-term interest rates, or the federal funds rate, in June 2006. As also noted, there have been four rate-increasing cycles by the Federal Reserve Board since 1980. Within 18 months of this particular cycle ending, the federal funds rate has begun a rate-decreasing cycle. Does that mean within the next 10 months, the federal funds rate will begin to decrease? Im uncertain, but the answer lies within the vast array of national economic reports. Let’s take a look at a few of the key and most recent reports and why they lead to this uncertainty.Of the many factors that affect the direction of interest rates, inflationary levels are one of the biggest. When the Federal Reserve Board is deciphering whether or not to increase or decrease interest rates, they are basing a large part of the decision on inflation, or the cost of goods and services increasing or decreasing. The Federal Reserve Board wants to see inflation at an annual level of 1-2 percent. The Consumer Price Index (CPI) measures the average price of goods at the consumer level, excluding food and energy. For January the CPI was reported at a monthly increase of .3 percent and at a 12-month increase of 2.7 percent. The Core Personal Consumption Expenditure (CPE) measures price changes at the consumer level. The CPE rose at .1 percent in December, increasing the yearly level to 2.2 percent. In order to buy those goods and services and dictate inflation, we need jobs, and jobs we have. In January, the unemployment rate inched up to a measly 4.6 percent with an average hourly earning rate across the country of $17.09. In January, 111,000 new jobs were added, but on average numbers continue to support roughly 150,000 new jobs per month which is right where we need to be. As far as the countrys overall economic consumption and production, fourth quarter Gross Domestic Product (the measure of production and consumption of goods and services in the entire U.S.) came in at an expected pace of 2.2 percent. However, durable goods orders fell a dramatic 7.8 percent for January. Furthermore, the January Chicago Purchasing Managers Index fell to a level of 47.9 (below 50 shows weakness in production). Is production slowing? Were all interested in the health of the housing market. Well, existing home sales for January were higher than expected at 6.46 million units sold. This was the highest units per month sold in seven months However; the median price per home decreased by 3.1 percent to an average of $210,000. But, on Feb. 28, new homes sales for January were reported at an appalling decrease of 13 percent from December. Is housing hot or cold? The economic data is quite confusing, difficult to interpret and of course uncertain. Its my job to analyze the reports. Although it is likely that interest rates are going to remain this current range,” there are still peaks and valleys where clients should and should not take advantage. Certain economic reports can sway mortgage rates upward or downward. Rates may rise or fall by up to .25 percent, and the change may only last for an hour or two in any given day. Make sure you are communicating with a professional who sees the peaks and valleys. As always, my business welcomes calls pertaining to this article, mortgages or the economy in general. William A DesPortes is a managing member of DesPortes, Selig & Associates, Professional Mortgage Services. He can be reached at 970-949-0653 or email@example.com.Vail, Colorado
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Vail’s updated plans regarding the state guidelines and isolation housing requirements is one of several pieces of information guests are waiting on heading into the 2020-21 season.