Remember Chicken Little - Fed's December rate hike had little impact on long-term mortgages

            Uh oh...here it comes again. There’s speculation the Fed could raise interest rates a hair and some are getting nervous.

            But if you look back at last June the scary scenarios that emerged with the buzz about a rate hike never materialized. 

(a "chicken little" post in 2015

 Look...up in the sky. It's a ????

            When the Federal Reserve’s feared “hammer” of a 0.25 % hike last December fell on the market the sound could barely be heard across the room at its Washington headquarters.

            Among the other chicken little headlines that swept various media, CNN Money observed at that time that although the rate increase was small “...it will affect millions of Americans, including investors, homebuyers and savers....Mortgage rates will gradually rise."

            Well, let’s check that prediction:

            As posted by the website Mortgage News Daily the June 2015 rate for a 30-year fixed mortgage was 3.98%. In January of 2016 after the Fed’s December hike the rate was down to 3.67%, and few days ago this May it was 3.57%.

            So the Mortgage News Daily statistics show that the 30-year rate is 0.10% lower than just after the rate increase.  The 15-year fixed and 5/1-year ARM also decreased, although the 1-year adjustable rate mortgage (ARM) did increase by 0.30%,

            Cory Benner and Derek Bickel, mortgage specialists at EverBank of Bend, the regional office of the national banking firm, explain what has happened to those fears of rising interest rates.

            “The most common misconception is that mortgage rates will rise when the Federal Reserve raises their rate. While this would seem intuitive, for several reasons this often isn’t the case,” Bickel notes.

            To clarify, Bickel emphasizes that the Fed’s rate is short-term and that an increase will have minimal effect on the lifetime of a 30-year mortgage. The long-term mortgage rate is the product of buyers & sellers of mortgage backed securities, with inflation expectations the predominant factor in the trading.

            “When the Fed raises interest rates, mortgage interest rates often actually

fall, Bickel emphasizes. “The main reason is that the rising Federal Funds rate will reduce the expected inflation.

            “If you are the lender, inflation erodes the value of your money over time (just imagine what $100 could buy today versus 30 years ago!) So, if inflation is higher the mortgage rate needs to be higher as well to compensate. And as inflation expectations go down, so do mortgage rates.”

           

           

Freddie Mac interest rates
	Month - Year
	June-15	Jan-16	May-16
30 Yr. Fixed	3.98%	3.67%	3.57%
1 Yr. ARM	2.54%	2.38%	2.68%
15 Yr. Fixed	3.19%	2.99%	2.81%
5/1 Yr. ARM	2.99%	2.89%	2.78%

Source: Mortgage News Daily-May 18, 2015

Bend briefs: Planes, Frogs, Weed and Potholes

            You can’t get there from here...that is if you plan on flying throughout most of May

            As May began Roberts Field in Redmond, the region’s commercial airline hub, was out of service as contractors started paving one of the airport’s runways, necessitating a complete closure in that the runways intersect in an X configuration.

            For months airport officials have been preparing passengers to plan for alternative travel out of Central Oregon. And airlines concurrently had blocked out the estimated closure dates of May 2 through 22 well in advance of construction.

            Bus services such as Central Oregon Breeze have braced for additional passenger loads and many travelers have used ground transportation to reach Portland for airline or train connections to other destinations.

            The timing of the project was intended to take advantage of warmer Spring weather before the beginning of the heavy summer tourism travel months. The improvements are estimated to cost $18.3 million, nearly 94% of that sourced from a Fedeal Aviation Administration grant and the remainder from a state ConnectOregon grant.

Dam gates open as federal judge orders spotted frog talks

            As the 2016 irrigation season began with water release from upper Deschutes River for downstream farms and ranches a fedeal judge in Eugene ordered environmental group plaintiffs and a coalition of basin irrigators to seek solutions for managing water to protect the spotted frog and assure agricultural uses.

            The order by US District Court Judge Ann Aiken was issued in a written opinion that followed her earlier denial of an injunction requested by environmental groups that would have forced substantial changes to this year’s release of water from reservoirs.

            Aiken also denied the environmental groups motion to delay her written opinion and set a trial date for their earlier suit that maintained current operation of the dams jeopardized the Oregon spotted frog listed as threatened in areas of the basin under the federal Endangered Species Act.

            The Deschutes Basin Board of Control, representing basin irrigation districts, has said that a habitat conservation plan, or HCP, being developed with US Fish and Wildlife Service, the Bureau of Land Management, which manages the dams, and other interests will address water conservation and management to benefit the frog.

            Earlier posts on the spotted frog:

Federal judge denies motion to disrupt Deschutes irrigation for spotted frog

Small frog makes big waves in Deschutes Basin: ESA listing spawns policy & legal wrangling

 

Grass now greener for pot growers

            After delaying action on marijuana operations on farmland Deschutes county commissioners have agreed to draft new land use regulations and rules that would permit growers to move ahead.

            The contentious issue has divided some owners and neighbors of existing farm and ranch land who argue that noise, smell, potential illegal activity and lighting from greenhouses would disrupt their quite lifestyle.

            Proponents counter that marijuana growing should be permitted by recent state legislation that resulted from a statewide ballot initiative,  and is covered under Oregon’s right to farm law.

            The legislation had enabled cities and counties to “opt out” of allowing growing operations within their jurisdictions.

            The county timetable calls for draft regulations to be completed by May 19; a review and first reading with any changes by commissioners May 25; a second reading in early June and for regulations to take effect 90 days after that.

            Growers will be required to comply with the new regulations within six months, although existing medical weed farmers will be have to observe new lighting rules immediately.

           

Quick, swerve...or risk a blown tire or busted shock

           

            The dismal condition of many Bend high-traffic streets has brought out the comic in local residents.

            Instead of the well-known “adopt a road” program to clean up trash, think of “adopt a pothole” volunteer groups. Or perhaps a rally to determine the top driver who can navigate several damaged roundabouts without touching a tire on one of the asphalt ditches.

            Local traffic cops may be having a tougher time guessing whether a driver has had a few too many of Bend’s official brewing libation, or just adept at dodging rutted street hazards.

            With a proposed fix in the form of a new gas tax soundly slapped down by voters, city officials are now looking at the possibility of tapping the tourism tax to raise an estimated $1.3 million for street repairs.

            That brought out a statewide tourism association’s threat of a possible lawsuit. An association spokesman said it might be a stretch to interpret the  tax on nightly lodging legislation as allowing receipts for street repairs as a tourism expense.

            Meanwhile, motorists are cautioned to keep their eyes off the cell phone or GPS and on the approaching potholes.