More Good News on Interest Rates

A report issued on leading economic indicators released today showed that the economy cooled in July. The index dropped .1% in July, while most analysts expected a .1% increase. This is further evidence that the economy is slowing, which is good news for interest rates.

Ken Goldstein, labor economist at The Conference Board, said a slowdown in the housing sector is becoming more pronounced, causing a drag on the economy. He also pointed to higher interest rates, lower consumer confidence and higher energy prices as other factors keeping growth in check.

However, he said it did not appear that the economy was headed for a hard landing.

"The economy is cooling but isn't likely to stall out," Goldstein said.

Goldstein said the essentially flat readings in the leading economic indicator index for June and July suggested continued moderate economic growth through the fall and possibly into the winter.

Investors have been embracing signs that economic growth is moderating since that could relieve inflationary pressures and allow the Federal Reserve to leave interest rates alone. At its last meeting, the Fed stopped raising interest rates for the first time since June 2004 but hinted it could resume tightening if it became alarmed about inflation.

Locally, mortage rates edged down in the Pleasanton area market, relecting the continued feeling that the economy has cooled enough to avoid further rate hikes by the Federal Reserve.

"Mortgatge rates had edged downward in the last 30 days", according to Randy Pickerell with Private Mortgage Advisors in Pleasanton. "Rates on 30 year fixed mortgages have declined about 3/8% in that period, which is great news for buyers" Fixed rates are currently in the 6.5% range, which is historically a very low interest rate.

Long term mortgage rates most closely follow the long term bond market. When the economy cools, there is less infationionary pressure, which keeps long term rates low.

Hmmm.... rates are down, more inventory is on the market, and prices are soft. Sounds like a perfect time to buy a house....

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