The Fed Smacks Again – Someone Should Smack Back!

I’m going to say it: The Federal Reserve needs to chill.

They are losing credibility with each comment they make. Fed members are once again speaking against the bond market’s recent rally, stating that the market seems to be getting ahead of itself. Every time we start to see mortgage rates improve, this happens.

It’s not as if we are talking about mortgage rates balling back into the low 4’s; we are talking about national rates falling from 7.3% down to 6.6%.

This is not a rate that threats uncontrolled housing demand and appreciation. In fact, this has done very little to drive homebuyers back into the market. Whether rates are 8% or 6.6%, too many potential buyers just can’t afford the payment associated with this range of interest rates. Since housing is a cost of shelter and NOT an investment, we won’t see mass people selling their homes to bail if home values decline a bit.

The Fed is missing the point and is causing undue harm to an important segment of the population while so far failing to create the desired “pain” they want the majority of industries to feel.

A balanced mortgage rate of 5% would help keep housing below normal healthy levels but will also help spur some to sell their current home and buy one that better suits their needs.

Fed members do not like today’s Initial Jobless Claims data, which showed that there were only 222,000 new claims last week. This is a very low number and shows continued strength in the labor market. Although we know the losses are coming, this report will likely fuel more unwarranted and damaging comments from a very unresponsible Fed.

With an unhinged Fed, floating is very risky. For those needing to close in the near term, consider locking.