Some mixed economic news this week, ending today with data that says American consumers spent and made more in August than anticipated and the inflation number is within the Fed's target (1.8% annualized) which gave some confidence to the markets that perhaps we may see rates stabilize in the next few months.  Immediately following the release of the data was the obligatory commentary on how it cannot last and oil prices will create worsening economy since they are over $80 per barrel--which could be very true but the same people said the same thing two years ago when oil hit $60 per barrel and last year when it hit $70.  I will admit to being very surprised that the rising oil costs the past several years (chart here) has not had a reverberating effect through our economy and inflation (chart here).  A main reason is that the relative cost of oil--and gasoline--is low relative to the overall cost of goods and services in our economy.  It may not seem like it when we pay $3.00 at the pump, but again relative to prices of milk, meat, tires, houses and tax preparers the cost of oil based products is in line with historical prices. This means of course that we enjoyed a rather lengthy period of time when the cost of oil based products was historically low in relation to other goods and services.  The end result is that the economy has been able to absorb a doubling of the price of a barrel of crude oil in the last two years without any significant impact on our economy.  Going back to my econ classes in the early '80s this is astounding.

 

Overall the market was flat for the week, a slight improvement in conforming pricing, on an interesting note.  If you look at rates from the last business day of September 2006 conforming rates are just 0.125% higher....while Jumbo pricing is 1.125% higher: