The upside benefit to higher oil prices, Corona CA

The upside benefit to higher oil prices, Corona CA

What you say?? Have I really lost it? Am I bunkers??

Why would there be any excitement toward the fact that oil prices are on the rise? Higher oil prices translates to higher gasoline prices. Which in turn means less consumption of material goods, and in turn slows down the economy.

However, there is a flip side to every coin. As the price of gasoline rises, due to the recent turmoil in the Middle East, investors search for the safe heaven of US Treasury. This in turn lowers the mortgage interest rates that lenders charges to consumers. As the mortgage rates decreases, the affordability to consumers rises.

This is explained by RJ Baxter's blog on ActiveRain:

Mortgage Rates in Denver, CO: Market Update by RJ Baxter 2-28-2011

After weeks of rising mortgage rates in Denver, CO and nationwide, rates improved significantly last week.

However, the good news on mortgage rates in Denver, CO was for bad reasons as the Libya conflict sent oil soaring and cast doubt that the economic recovery will continue with higher oil prices.

Although the US gets only a small fraction of it's oil from Africa and Libya, the fear resulting from violence in Libya and other Mideast countries sent oil higher and cast global doubt on the stability of economies. As a result money flowed into the relative safety of US Treasury assets.

When there is demand for US debt, bond prices, which move inversely to bond yields, go up, which causes mortgage rates in Denver, CO to go down.

The bond chart on the left shows this relationship. Note the upward trend in bond prices over the past 8-10 days. Although there is much more ground to re-take to get mortgage rates in Denver, CO back to levels we saw late last year, we have seen improvements back to where we were in early February.

Also casting doubt on the strength of the recovery was continued weak employment data and continually weak housing data. In fact, it was announced last week that the NAR may have overstated housing sales data by as much as 20%! This in light of already weak housing data over the past 3-4 years. If the numbers from previous years are adjusted down, how will that make the economic recovery look or the recession for that matter?

Bottom line is that mortgage rates in Denver, CO and nationwide are on a nice downward trend which means continued great opportunities for refinancing and buying a home with affordable payments.

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No matter where you live in this country, this is a great opportunity to lock in your rates before they go up again. Even higher oil prices can translate to good housing market. Happy shopping everyone !!!