Interesting Reuters headline making the rounds today on the news of some unexpected life coming back into the US economy.
Housing starts jumped 22% in January and the closely followed Producer Price Index was up just 0.1%, suggesting that inflation is under control even with the government pledging to pump nearly $800 billion of stimulus money into the economy.
The Federal Reserve is also expected to jump into the mortgage business in its largest capacity to date, purchasing up to $750 billion in mortgage-backed securities from Fannie Mae and Freddie Mac, which should drive 30-year fixed interest rates below 5.00% if and when the plan is formally announced.
Three out of four mortgage applications submitted last week were for refinances, according to the Mortgage Bankers Association. Fannie Mae says the volume of mortgage loans it refinanced in February was $41 billion, nearly three times the amount refinanced in January and evidence that homeowners with jobs, credit and documentable income are able to save money.
Economists are hopeful that lower mortgage payments will spur spending in other areas of the economy.
While we are still in a very sticky economic situation, it's evident that government action is stirring the pot and creating some positive momentum for the economy. Like turning a giant flywheel, there's been a lot of effort to get the wheel turning, but the hope is that we'll see more and more momentum as the different components of the stimulus plan begin to take root.
