Rates are Still Great, Regardless of Politics!

In June when the Federal Reserve issued its policy statement regarding rates and the economy, analysts rushed to slice and dice the statement. But Nations Lending’s branch managers took a breath and reminded their originators that the market questions how important the Fed is at this point – especially in the mortgage market.

The Fed has made it clear that it is focused on employment and on inflation. Inflation is relatively tame, but let’s look at unemployment. Information received through May and June indicate that the labor market is doing pretty well, on average. It is most encouraging that, at the rate people are leaving the labor force (820,000 in the past 2 months), there will be zero unemployed by the end of 2017. We know that won’t happen, but still…

Nations Lending knows that whatever problems the U.S. economy faces have little to do with monetary policy and looking to the Fed for a solution is pointless. And news continues to come in from overseas which move our rates.

Some percentage of the workforce is under-educated, and the gap between the incomes and financial contribution of those with higher education and those that don’t have it is widening. Many believe that the biggest economic problem in the United States is the underfunding of Social Security and Medicare. Social Security has an unfunded future liability of nearly $25 trillion. It has also been spending more than it take in for the past 5 years. The Medicare underfunded liability is estimated to be around $48 billion.

We know that an election is coming up, and yet the candidates don’t seem to be dedicating much rhetoric toward these issues. And in fact housing has escaped the political speeches – we’ll see what happens with this week’s Republican convention. Meanwhile, we, as an industry, grapple with something else weighing down productivity: government regulation. And we’ll see if the candidates address this.