Jim's Daily Blog

The Midwest Flooding And Its Impact On Your Home Mortgage

Flooding in the Midwest has displaced thousands of families and caused billions of dollars in damages.

It may also cause mortgage rates to rise.

As the extent of the damage becomes more clear, prices for grain and livestock are soaring.  For example, a host of dietary staples are suddenly more expensive at the supermarket, including:

• Meat
• Pork
• Chicken
• Dairy
• Eggs

Rising food prices are considered inflationary and inflation tends to make mortgage rates rise.

But of all the foods that are increasing in price, it's corn whose price is rising the most -- up 70 percent so far since January.  This is mostly because flood waters damaged up to 3 million acres of harvest in Iowa, our top-producing state.

Corn, of course, is a primary feed for livestock, so rising prices make it more expensive for farmers to raise hogs, cows and chickens.  These higher costs get passed along to consumers and contribute to a higher Cost of Living around the country.

After facing (and adjusting) to rising gasoline prices, Americans are facing higher costs again -- this time at the supermarket.  And if food prices don't recede with the flood waters, Americans may find that they're getting hit in a third place -- right in their mortgage rates.

Source
Hog Farmers Face a Perfect Storm 
Ilan Brandt, Joe Barrett 
The Wall Street Journal, June 20, 2008

(Image courtesy: The Wall Street Journal Online)