by Tim McLaughlin, Senior Vice President, Weichert Financial Services
Mortgage rates have ticked up ever so slowly over the past week, mainly driven by the inability of the President and Congress to come to an accord on the “debt ceiling” situation. Most of us in the financial sectors think a deal to avoid a catastrophic situation will be struck before the August 2nd deadline, however, if the unthinkable does occur, it will be as close to political suicide for any elected government official that one could get. The potential ramifications of not striking a deal:
- US Sovereign Debt loses its valuable “AAA” rating
- Fixed Income rates begin to skyrocket, most notably mortgage rates
- Or Fixed Income rates tick up more slowly, but Equities get hammered in the “flight to quality” move
Where we are:
- President Obama stated Wednesday that he “would accept a short-term increase” in the federal debt limit “if congressional leaders reach agreement on a “significant” deficit-reduction plan before Aug. 2 but need more time to pass legislation.”
- “The Federal Reserve is actively preparing for the possibility that the United States could default” as the deadline for raising the debt ceiling approaches, the President of the Philadelphia Federal Reserve Bank said Wednesday.
With 11 days to go, we will continue to monitor the situation and hope for a solution that accommodates all.
U.S. housing construction rose in June to its highest level since January, as housing starts rose 14.6% to a seasonally adjusted annual rate of 629,000, according to the Commerce Department.
“Better construction levels are better than not, but regional variation and the lack of growth in single-family permits suggest catch up construction is under way rather than something more fundamental,” said Steve Blitz, senior economist at ITG Investment Research.
Construction of single-family homes, which made up about 70% of all starts, grew by 9.4% from a month earlier.