Financial Markets
The Dow Jones topped of Friday encouragingly, at 12,130, which is down over 260 pts for the week. Political turmoil throughout the middle-east has investors fleeing stocks for safe-haven bonds and various commodities. The developments over-seas have only temporarily assisted with mortgage rates this past week.
As you probably have all noticed gas pump prices increasing by the minute, the price of oil has spiked to $97 per barrel. High oil prices will adversely affect mortgage rates because the price of oil has a direct impact on inflation, which is a mortgage-backed security’s arch-nemesis.
An increase in oil prices leads to instantly higher shipping costs and producers of goods have no choice but to pass the cost increase on to the consumer. If the costs of the goods we consume are increasing by 5-7% per year, yet the mortgage-backed security is only earning 4% rate of return, the investor effectively loses his money by parking it in the bond. The rate of return for the investor (which is the mortgage rate for the borrower) has to increase to make it an attractive investment again.
Local Economy and Real Estate Market
Moody’s released a report about the future of the Las Vegas tourism industry, and appears to be cautiously optimistic. The reader’s digest version is that visitor volume will continue to improve but profitability will not make major strides until 2012, because of all of the new hotel rooms that have been added over the past 12 months. The “X” factor is…our favorite topic this week…OIL. High oil prices will lead to higher airfares and less visitors to Las Vegas.
Home sales for Southern Nevada reached nearly 3,400 for the month of January, with the median price of new homes increasing slightly and the median price of resales dropping. 20% of the 3,098 resale transactions were short-sales. ½ of the buyers paid cash..
