The Rating agency that dropped the credit rating from AAA to AA+ is Standard and Poor’s and is only one of three of the rating agencies. It takes two out of the three to actually effect the credit rating of the country’s debt. In addition my opinion of these agencies is not really very high because they are the same ones that rated AAA the tranches that were at the bottom of all the trouble we now face. In additon many believe that the rating drop was done to send a political message to the politicians
That said, we have all expected Sonoma County Real estate mortgage rates to rise by now. We fully expected that we would be experiencing a certain amount of inflation putting pressure on rates but that has just not been the case. In fact what has happened is that we are seeing a flight to safety to the US bond market pushing the yields down to their third lowest level ever. Obviously, every investor out there believes that the likely hood of America defaulting on their debt is lower than any other available option out there.
So today, the effect of the drop by S&P’s mortgage rating I think has little to do with the mortgage rates but the global economic worries are causing rates to drop because of the dramatic interest in the US bond market. Right now we are in a very low real estate mortgage rate cycle that most likely won’t last very long. I would expect rates to rise very moderately over the next couple of weeks but overall stay low through the end of the next quarter. For whatever that is worth.
I still think that Sonoma County Real Estate is the best long term protection against inflation.
