Hurricane Sandy and Your Mortgage Rate -- What's the Deal?
LOS ANGELES, Nov. 8, 2012 /PRNewswire-iReach/ -- The geographic path taken by Hurricane Sandy was wide, as the storm tore through several states along the eastern seaboard in the Mid-Atlantic and Upper East Coast regions of the country. Now, we're learning that the economic effects of the Sandy may be just as widespread. The storm hit a large portion of the population, destroyed, and/or flooded key infrastructure like New York City's Metropolitan Transportation Authority Subway System, and even closed the New York Stock Exchange and the NASDAQ for two days. So, how will this affect home mortgage rates -- both right away and down the road? Immediately following the storm, interest rates dropped slightly, most likely due to the fact that the nation's main financial stock exchange centers in New York had to be closed for a couple of days.
Adding to the already-complex situation, the U.S.. Bureau of Labor released their unemployment statistics for October right in the middle of the clean-up. That's when we learned that employers added 171,000 people to their payrolls during the previous month, which was higher than anticipated. After taking those new hiring numbers into consideration, they set the national unemployment rate at 7.9%. That's down from its peak at 10% during the height of the recession, but it's still 3% higher than it was prior to when the housing bubble burst in 2007. Economists say the unemployment rate is likely to motivate the Federal Reserve to continue its new bond-buying program that went into effect in September. The plan, called "Quantitative Easing," will buy $40 billion a month in mortgage-backed securities in an effort to kick-start an economic recovery. The Fed originally acknowledged that the results of Quantitative Easing could take awhile to show up. However, now they could take even longer because so many homeowners now have to repair or rebuild homes that were damaged or destroyed by Hurricane Sandy. As if the unemployment rate wasn't enough to encourage the Fed to continue the bond-buying program, the damage caused by the hurricane will most certainly influence them to continue with the plan well into 2013. What about further down the road?
Because so many homes were damaged by the storm, there are fewer properties for sale now than there were three weeks ago. The increased demand but decreased inventory of available homes means listing prices could be affected by inflation. Also, some homeowners will be anxious to repair their damaged properties before receiving their insurance checks, so they make take out a loan to pay for the repairs in the meantime. That inflation -- coupled with an increased demand for financing -- means mortgage rates may increase in the months to come. So, if you're looking to take out a mortgage loan, now may the best time to do so. When Spring rolls around, and some of the homeowners who had properties destroyed by the storm have received their insurance checks, they are likely to begin searching the housing market for a new place to live. The increase in home sales and new construction could increase the demand for a mortgage, and could therefore, influence lenders to raise interest rates. In a few months, we may be waving goodbye to those record-low rates!