San Francisco Real Estate - Residential

Freddie Mac: 30-year mortgage averages 6.18% vs 6.13%

Dow Jones MarketWatch reported today that mortgage rates edged up over the week following the news of rising consumer spending. This surge in spending is causing fears of higher inflation. Does anyone else see paranoia here?

We want strong numbers to show that our economy is humming, yet because it is doing well, there are fears that this will cause rampant inflation. I, for one, am skeptical. The market is based on a lot of factors, and like the weather, it is difficult to predict. So, in my opinion, the Fed's tight grip on the interest rates can only be one factor in controlling inflation and can not be a panacea to all ills.

Recently I went to a website on economics and found an article on inflation. Here is their definition:

"Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability."

Think about that. Everyone wants to make more money and earn more for the products they produce, yet we don't want prices to increase because it causes inflation. Why not? Those $1,500,000 houses and condos that are selling in the City used to be worth $500,000-$700,000. Even though a million dollars isn't what it used to be (as Donald Trump says), it's still an awful lot of money. So it seems that in a lot cases, inflation may be our friend.

To me, money has always seemed an elusive concept anyway. Most of the money now is just electronic data sitting in a database of some bank somewhere and actually doesn't account for anything until I buy something real. I could pull my money out of the bank and have money under the mattress, but paper money is only worth what people believe it is worth... and goes down in value every day... because of inflation.

So it seems to me that there are things much more important than money, and that is the thought as we head into the new year. Enjoy life, and don't worry so much. Stop listening to the negative news and create your own positive reality. Interest rates up or down; stock market up or down; real estate market up or down it really doesn't matter. Health and happiness are the keys to enjoying life!

Happy New Year!

- Mick Orton

posted by SFResidence.com @ 9:50 AM