Lower Interest Rates Because of Hurricane Sandy?
Although Hurricane Sandy could wind up causing upwards of $50 billion in property damage, there could be at least one silver lining: lower interest rates.
Barry Habib, chief market strategist for Residential Finance Corp., Columbus, Ohio, believes that an improving jobs picture doesn’t always mean rates will increase.
“While a pretty good jobs report would normally lead to higher interest rates and better stock prices, that isn’t happening today,” he said. “In fact, we are seeing the reverse–where rates are very modestly improving and stocks are declining.”
Habib said this is occurring–on stocks, at least–due to Hurricane Sandy. He added that individuals are “fearful” of the negative impact the natural disaster will have on the economy.
Bond prices are improving due to the federal government purchasing mortgage-backed securities, which keeps interest rates low.
Because of the recent Hurricane, Habib believes the Feds won’t “take their foot off the gas pedal” after this devastating event that caused thousands of homeowners to lose their properties.
“If I am a homeowner or someone looking to refinance, this probably is good news for the longer term interest rates to remain low; it also may create–based on the psychological effects of this terrible storm–a temporary drag on housing which means this is a time period where people could get additional value,” Habib said.