Where Are We? Where Are We Going?

So where are we going and how soon is the trip going to begin? We are going to see lower interest rates in the near future as we are really living in a split economic environment. Those on the higher economic plateau are doing fine while those who haven't made it to the lofty heights are suffering with a stagnant wage market and higher costs for almost everything they need in their daily existence. This would include fuel, health care, insurance, etc, For this group, trying to make ends meet is getting more and more difficult.

The economy in recent years has been fed by the consumer who was pulling large amounts of equity out of their houses. Soon after that came the real estate slow down; the equity isn't growing nearly as fast in most places and starting to shrink in other areas. Being employment is not a real problem at this time, (lack there of would cause house prices to accelerate to the downside), the only stimulus to get housing back on track is lower interest rates.

Therefore, as soon as economic numbers start indicating a weaker economy, the Federal Reserve will have to start lowering their short term rates which will have a ripple effect across the mortgage market. As we begin the year, the ten year treasury note remains about 2/3% lower than the "over night" money which has created what would be referred to as an inverted yield curve. This isn't normal in stable economic markets over the long run.

In another note, the states have reaped a windfall of tax revenues from the booming real estate market in the past few years along with the Federal Government. This has come from the profit taking of those who have sold their houses. The States would be hurting again if this were to come to an end.

I will have more economic updates for you as the week progresses.