Don't Fear Inflation (I think)

It's another wild and wacky day in the markets. The yield on the 10-year briefly rose above 3% which could affect mortgage rates, but then again mortgage rates are shaped by what Fannie Mae and Freddie Mac are doing in the secondary market. Wait a second, mortgage rates are rising too. Is the world coming to an end? No, of course not. One big surprise was the surge in "pending home sales," an indicator that the financial press recently began paying a lot of attention to. Meanwhile, oil prices look rich and the last time I was in the supermarket a six-pack of Sam Adams was almost $9 and the fancy hormone-free chicken was $8 a pound. Where am I going with all this? If inflation comes and the economy continues to gain jobs that means tax revenues will rise and our state and local governments will finally be in the black (revenue wise) and maybe (just maybe) the financial crisis will end. As the value of "things for sale" rises, so will tax revenue. (Uncle Sam will benefit too.) The big question mortgage bankers, Realtors, and home builders will ask is this: will inflation spill over into housing? My initial reaction is no. There are way too many homes for sale and not enough buyers. But give it three more years…