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Tuesday, September 06, 2005

Katrina affects Mortgage rates

An estimated 200,000 homes in New Orleans alone may have been or will have to be demolished as a result of Katrina. That is as many as were destroyed in all four major hurricanes last year. Then there is the damage along the hundreds of miles of coastline.
As a result:
*Demand for contractors and repair services will be enormous for months, if not years, to come.
*Building materials are almost certain to face shortages which will inevitably lead to higher prices.
*Energy costs are likely to remain high for some time to come.

The "experts" are already debating the affect on the economy. Perhaps the first indicator appeared with the substantial rise in bond prices late last week

Frank Nothaft, vice president and chief economist at Freddie Mac said, "Market jitters about high energy costs and the spill over into other sectors of the economy have led to a decline in bond yields, which typically means lower mortgage rates. Speculation that the Federal Reserve may soon take a break in raising short-term rates reduces upward pressure on long- and short-term interest rates." As to the future, he added, "As if all that wasn't enough, the devastation caused by Hurricane Katrina and the echo effects on future energy prices in the US may mean that mortgage rates will fall even further in the coming days ahead."

Preferred Mortgage, Bobbi Dickerson

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