This morning the Consumer Price Index came out with a .04% increase in prices. However when
you take out the food and energy for the month of April, the index still was in the .02% range which means virtually an economy without much inflation. Nevertheless the Federal Reserve was concerned about the headline and is still considering raising the interest rates as early as June.
I had to laugh about the Fed’s conclusion on inflation. When I first entered the real estate industry
back in the 70’s I was syndicating small shopping centers with a couple of partners. I did the leasing and in every lease we had we had a minimum of 5% increase and a maximum of 10% increase either every 6 months or a year, depending on the lease. That is more than 10 times higher than the .04% that came out today and that was the minimum raise, not the maximum.
Now before I give you my conclusion I must tell you that the average home interest rate was about
7% in the 1970s, while we currently have rates in the high 2% to 3% range. There has been a lot of house cleaning in the financial industry since the early 1970’s and a lot of items were taken out of the consumer price index. The one that had to go was the mortgage interest rates which were
highly influencing the consumer price index, and being influenced as well.
There are two things to learn today: how low the mortgage rates are, and what changes are made over the years to produce a better index. Once you realize this is not your father or mothers’ mortgage market you should give yourself some permission to wander about and try to find a better financial situation for you in today’s financial markets.
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