Sacramento Mortgage Rate Update: Schizophrenia

The 30 year conforming fixed rate mortgage ended the week at an average 6.73 with .6 points in the Western U.S. according to Freddie Mac’s weekly survey.

BENEATH THE WAVES

Peering beneath a placid surface, the water is pretty churned up.  One week, retail sales are up and consumer sentiment is down, the next week sentiment is up and sales are down.  Are people feeling bad and buying stuff anyway, or are they feeling good but not buying? 

Unsold inventories are up.  Are businesses optimistic about future consumer spending or did they overestimate sales?  And what about the extra $53 billion that consumers spent on gas in the 2nd quarter due to price increases?   Gotta have an effect, doesn’t it? 

Meanwhile the Fed refuses to lower rates as it wrestles with inflation that is increasingly subject to global currents and beyond their control.  The weak dollar makes everything we import more expensive and creates an inflationary vortex all its own.   And in a curious flip-flop, the so-called debtor nations like China have become creditor nations who help prop up our economy by buying most of our U.S. Treasuries.  But the Chinese reportedly invested $3 billion in the Blackstone IPO, a riskier equity-based strategy that diverges from their traditionally more conservative approach. 

Finally, credit spreads are widening, leading me to the conclusion that despite Fed actions, the 30 year fixed rate isn’t coming down anytime soon. 

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