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Gas Prices Bite (Soon Rates Will Too!)


Lock and load guys. If you’re in the market for a home purchase and are going back and forth with various brokers on rates and such, time is not on your side. This is no time to mess around with too many rate quotes over an extended period of time. Rates are on the up swing and I promise you that you’ll be waking up every morning with the possibility of rates moving higher and higher.

Of course you don’t need to be a rocket scientist to figure this one out. Just look over at the price of gas at your neighborhood gas station. And if you think your local supplier is some price gouging rascal, take a look at the national gas map. You’ll soon realize that yep, more and more of your dollars are heading over to the Middle East. This rising price is driving inflation and soon enough mortgage rates will catch up. It’s only a matter of time. And today the market has already started to show that long term rats are on the rise.

I drove by the gas station around my house on Thursday afternoon and it said $3.99 for a gallon. This morning on my way to work when I filled up it was $4.05 a gallon. I fired up my computer and scanned the headlines for the major news of the day and sure enough gas prices lead in pretty much all newspapers stating that the average gas price crossed $4 across the USA.

I don’t know who is causing prices to rise. All I can say is that even as a free market champion I find it hard to believe that the market would push prices this high this fast. I mean remember the days of the $3/gallon gas? Well, it wasn’t that long ago, maybe last Christmas? So, there has to be some glut somewhere that causing this whole mess. The biggest impact of rising gas prices on the economy is of course is rising inflation.

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After reading all this exciting news it was no wonder that when I logged in to Mortgage Market Guide to get some mortgage specific analysis, the advice was to lock. That price of Mortgage Backed Securities was falling (rates were hence rising) and there was no telling when lenders would issue a intra-day re-price for the worse. The market closed today with the Fannie Mae 30 year 5.5% note down 62 basis points. This will invariably result in a higher interest rate the next day.

And I expect this trend to continue. Maybe not every day, but over the next several weeks. The Fed is making noise that they will in fact have to start raising the short Federal Funds rate to combat the rise in inflation. That is really the Fed’s only weapon. After all, the real weapon would be to figure out a way to manage this imbalance in the world supply of oil. But that would require thought, planning and a lot of foresight. All of which seems to be in short supply.

Image source: Papasikas

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Written By

Writer for national real estate opinion column AgentGenius.com, focusing on the improvement of the real estate industry by educating peers about technology, real estate legislation, ethics, practices and brokerage with the end result being that consumers have a better experience.

7 Comments

7 Comments

  1. Jennifer in Louisville

    June 10, 2008 at 5:32 am

    A weakening dollar is arguably IMO the biggest culprit for rising gas prices (yes, there are lots of other factors). But regardless of all of the other reasons, it is all amplified by the dollar declining in value.

  2. Shailesh Ghimire

    June 10, 2008 at 8:58 am

    Jennifer,

    That is a good point. The weak dollar isn’t very good when it comes to imports and is usually very inflationary.

  3. Sick of High Gas Prices

    June 10, 2008 at 11:57 am

    All we need to do is open up domestic production and this problem will go away. There are laws that have crippled domestic production for the last 25 years and this has lead to nearly 100% dependency on foreign oil. Just announcing the ability to drill offshore would force speculators to rethink their current trading strategies. Just last month the Democrats killed a bill that would have allowed states to opt out of the national moratorium that has been in effect for a quarter century against oil and gas drilling in more than 80 percent of the country’s coastal waters.

    We need to decide if some oil platforms that 99.9% of us will never see are worth saving our economy or not. Personally I am all for producing domestic oil so we can stop sending our money and troops to the middle east.

  4. Mack in Atlanta

    June 11, 2008 at 6:10 am

    Yesterday was a hectic travel day for me. First a meeting in Duluth, then off to a closing in Lawrenceville, back to Duluth to turn in all the closing paperwork, then to Suwanee for a quick meeting, then to Grayson to pick up paperwork for a listing and finally to Lilburn to get a contract signed. A Tahoe is a great vehicle to drive for showing property to families, but $4.00 for a gallon of gas hurts when you drive a Tahoe. Today I will need to fill up, that will probably be close to $100.00.

    Clinton should have never vetoed the bill for drilling in Anwar back in the 90’s. As stated previously we must pursue domestic production.

  5. Shailesh Ghimire

    June 11, 2008 at 10:13 am

    Domestic production would help, but a shift towards nuclear power is also going to be necessary. Japan and China are moving aggressively into nuclear power and the US needs to make a similar move. That would help tremendously.

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