July 2011

What Happens to Housing and Mortgage Rates if They Don’t Raise the Debt Ceiling?

Though it seems inconceivable, it is looking more possible that congress could really fail to come to an agreement on raising the debt ceiling, and the US government could default on  its debt. This was looked at as inconceivable because failing to raise the limit would be a self inflicted wound, and would trigger a downgrade in US debt, riling the investment markets and costing the government more in higher interest charges. But so far, no agreement is on the horizon. It is still likely that some last minute agreement will come around, but what happens if it doesn’t? If the debt ceiling isn’t raised, the government won’t have enough cash to pay all their bills, and will have to prioritize what bills they will pay. How will this affect the the mortgage industry and those who are financing properties while this is all playing out? No one knows for…

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Chicago Illinois Mortgage Rates Week in Review for the Week Ending 07/21/2011

It is now down to crunch time. The government will officially run out of money on August 2nd if a deal isn’t reached to raise the debt ceiling, and congress is still locked in with no agreement in sight. At the end of last week it looked like a big agreement was coming together. President Obama and House Speaker Boener, the leading Republican in the House, were on the verge of a plan that would put in place big budget cuts with modest revenue increases, but no new taxes. This deal fell apart Friday night, right after the financial markets had closed, when it became clear that Boener didn’t have the support from his rank and file. So now all parties are scrambling to come up with something, but there is no common language to what an agreement could look like, so it comes down to a high stakes game…

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Chicago Illinois Mortgage Rates Week in Review for the week Ending 07/15/2011

Mortgage rates moved sideways last week as the debt ceiling negotiations and European situation were the main market focus. This week may mark the end of the debt ceiling crisis. Up until now there has been no chance of a compromise since both sides positions have been set in stone. The Republicans, pushed on by the newer Tea Party backed freshmen congressman, want deep spending cuts and no new taxes of any type. President Obama and the Democrats insist that taxes have to be part of the mix, and have drawn the line on deep entitlement cuts. Coming up with a real plan to make meaningful cuts and get both sides on board has become an exercise in magical thinking. The two party’s are looking at this from mutually exclusive view points. The Republicans believe that cutting taxes and slashing spending will be just what we need to get the…

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Chicago Illinois Mortgage Rates Week in Review for the Week Ending 07/08/2011

The most important economic report released each month is the monthly employment report, and the numbers released on Friday were awful. The BLS employment report released on Friday showed a gain of 18,000 new jobs over the last month and a revision of last month’s report showing 34,000 less jobs than previously reported. The consensus expectations were for a gain of 90,000 jobs, and many expected that the numbers would come in stronger. It takes about 150,000 new jobs created each month just to keep up with new people coming into the market, so this was a real stinker of a report. In a separate survey, the unemployment rate increased from 9.1% to 9.2%. There was nothing optimistic in the report that could be spun with a silver lining. Monthly wages were down, the participation rate was down, if it was higher meaning more discouraged job seekers, (the unemployment rate…

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Chicago Illinois Mortgage Rates Week in Review for the Week Ending 07/01/2011

This was a bad week for mortgage rates as treasury bonds and mortgage bonds lost over 100 basis points, sending fixed rates up about a quarter point higher. Part of this was due to the situation in Greece. The Greek parliament approved the austerity program, a prerequisite for any bailout, and the European Union moved forward with the first step of support. But this is still just a temporary solution. In order for this package to work, private investors in Greek debt have to be on board, and the new deadline for an agreement on how this will work has been moved to mid September. As we get closer to this date, the markets will refocus on this and the dance will continue. The Greek debt is still a major problem, but it has been kicked down the road a little farther. But Greece was only part of the reason…

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