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Katrina & Oil Prices: The Perfect Storm

katrina [1]

Late last week, as the hurricane threat [2] to the Gulf of Mexico increased, the oil futures market became concerned that production would be affected. Futures traders bid up the price of oil and gasoline due to the perceived future constraints on supply [3] and now oil seems headed for $70 per barrel. The futures market seems hyper-sensitive to any threat to oil production these days.

refinery2 [4]



How can this impact housing prices? [5]

Simple. Higher Mortgage Rates.

As this and other inflationary factors gain momentum (if they do), bond investors would likely become concerned about the inflation risk in the long term, which eventually translates into higher borrowing costs. Higher borrowing costs generally translate into lower home prices.

Then again, thats just one theory of many. Lets ride the storm out.