Chicago's Mortgage Choice - December 29, 2015 Real Estate Report - Predictions For The New Year

As we start a new year, there is no shortage of predictions with regard to the real estate markets. Here is where the experts have weighed in: Realtor.com®: Home sales are poised to zoom to the highest levels since 2006 next year, according to a 2016 housing forecast issued by realtor.com®. Gains in new-home construction and existing home sales are both expected to push total home sales to the highest levels in years. The new-home construction market is expected to see the most gains in 2016, with realtor.com® forecasting a 12 percent year-over-year increase in housing starts and a 16 percent year-over-year growth in new home sales. Fannie Mae: “We see consumer spending as the biggest driver of growth moving into 2016,” said Fannie Mae Chief Economist Doug Duncan. “An uptick in average hourly earnings and low unemployment numbers are contributing to a positive outlook for consumer spending. The supply of existing homes remains lean, putting significant upward pressure on home prices. Meanwhile, we expect interest rates to rise only gradually through next year, and an improving income trend should help support affordability.” Redfin: Housing projections for next year include slowing price increases and sales growth, easier credit, more first time homebuyers and continued inventory shortages. Redfin sees home prices increasing in the 3.5 percent to 4.5 percent range next year. It looks like the consensus is for moderate real estate growth and moderate interest rate increases, with new home construction and first time buyers leading the way. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - December 15, 2015 Real Estate Report - The Fed Meeting Finally Arrives

The Federal Reserve Board's Federal Open Market Committee meets today and tomorrow. This is the most anticipated meeting of the Fed in almost a decade. It has been exactly seven years since the Fed moved short-term interest rates to close to zero and it has been over nine years since the Fed actually raised short term rates. Now the markets are expecting the Fed to raise rates from these historically low levels once again. The Federal Reserve has indicated all along that the markets would get plenty of notice before they raise rates. This notice is designed to prevent market shocks. One must remember that the Fed is only raising short-term rates. For example, the Federal Funds Rate is the rate banks charge each other overnight as they balance their holdings. The other rate controlled by the Fed is the Discount Rate, which is the rate they charge banks for borrowing money. All very short-term. The question is--how can these rates affect long-term rates that consumers pay for loans on cars, homes, credit cards and even student loans? Some rates, such as credit cards which are pegged to the prime rates charged by banks, may go up instantly. Other loans which are based upon longer term rates such as home loans, are not as easy to predict. That is where the markets come in. The markets react to what the Fed may do before they take action. For example, rates on home loans have risen in anticipation of the Fed's move. Now the markets will listen to what the Fed will say about potential future interest moves. So let's see what the Fed has to say in addition to whether they raise rates. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - November 3, 2015 Real Estate Report - Real Estate Producing Real Jobs

This is the week that the October employment report is out. As our unemployment rate has fallen with millions of jobs being created each year, many have complained about the level of the jobs being created. Too many of these openings are for lower paid and part-time workers. We think the slow recovery of the real estate market has had something to do with that. The real estate industry is not only a great job creator, but also a creator of higher paying jobs, from construction workers to bankers and lawyers. Judging by the strength of the real estate market this year, it is possible we will see the growth of better jobs soon. And based upon a recent report that was released by the Mortgage Bankers Association, things are only going to get better in the real estate market in the future. Nearly 16 million new households are expected in the U.S. housing market by 2024, which Mortgage Bankers Association economists said should lead to much greater demand for both renter- and owner-occupied housing. MBA Vice President of Research and Economics Lynn Fisher added, "With an average of 1.6 million additional households per year, housing market growth over the next decade could be among the strongest the U.S. has ever seen." If we are right, then real estate could bring us to the final stages of our recovery and make it complete. We may not see a reflection of this theory in this week's jobs report, but it does explain why the Federal Reserve Board keeps holding off on raising rates while still telling us to be prepared because a rate hike is coming. Builders are already talking about a shortage of skilled laborers. To put these numbers in perspective, it took our country almost 250 years to grow to 125 million households. Now we will see 16 million added in ten years. And that does not even include the housing stock which will have to be replaced because of age. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - October 27, 2015 Real Estate Trends - Actions and Words Revisited

2015 has been an exciting time for the markets when meetings of the Federal Reserve Board's Open Marketing Committee occur. When the markets get excited, stocks, rates and more all seem to get more volatile. The interesting thing about all of this is that the Fed has not done much this year. They have discussed raising rates and said they were going to raise rates, but they haven't. And that is why we keep saying that the Fed's words are so important. As a matter of fact, the release of the minutes of the Fed meetings a few weeks after the meeting are just as entertaining as the meeting itself. For the most part, the markets are expecting no action again this week. There is no meeting in November and that means that if the Fed does not raise rates, they have only one last meeting in December to fulfil their prediction of a rate increase in 2015. However, that prediction does not make an increase a certainty. The Fed's words always leave them an alternative path. This is why the economic data released this week and next will be so important even though it comes after the Fed meeting. This week we have readings on new home sales, economic growth for the third quarter and personal income and spending. Next week we have the employment report. This data will carry more weight with regard to the Federal Reserve's next move than the Fed's words. After all, aren't actions supposed to speak louder than words? This data is real economic action. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - October 13, 2015 Real Estate Report - The next really important number

Now that the September jobs report is behind us and we witnessed a slowdown in the creation of jobs, it will be interesting to see if the market's fear of a general economic slowdown is well founded. That is why the release of the third quarter snapshot of economic growth at the end of October will be very important. The economy has been up and down this year. The first quarter was slow and the second quarter saw more robust growth. Many economists are expecting a "regression towards the mean" this quarter. Before we get too worked up about this number, there are a few points that should be made about the statistic. First, it is a measure of past growth, and not indicative of what is happening now. It is also subject to future revisions and the future revisions will give a better view of the second half of the third quarter. Finally, the Federal Reserve Board meets again the same week as the data is released, but they conclude the meeting one day beforehand. Therefore, the Fed will release their results without the benefit of seeing this important snapshot of our economy. As of now, the markets are betting that the Fed will hold off rate increases again in October based upon the disappointing jobs data, as well as other reports showing that manufacturing is slowing. Even the strong growth we have seen in the real estate sector seems to be slowing a bit, though this sector still is one of the shining stars in the 2015 economy. For now it looks like real estate will have to carry us through this segment of our economic recovery. Thus, it is great news that recent reports have shown homes as affordable as ever in 2015. Keith Stewart 773-529-7000

Cicago's Mortgage Choice - October 6, 2015 Real Estate Report - Jobs: Could Higher Rates Be Good?

If you want a good indication of whether the Federal Reserve Board might raise interest rates in their October or December meetings, last week's employment report gives us a hint. The numbers were disappointing with an increase of under 150,000 jobs and a downward revision in the previous months' data. This means that there is less pressure on the Fed to move quickly, especially considering the fact that wage inflation continues to be muted. The report continues our good news with regard to low interest rates. Apparently, we are going to have a fall sale on real estate with home price increases also moderating. On the other hand, many analysts are now thinking that the Fed raising short-term rates would be good for the economy. Why is that so? Right now the Fed has created a great amount of uncertainly regarding the anticipated rate increase. The markets, companies and consumers do not like uncertainty. Rampant uncertainty was one reason our recovery from the great recession was so long and arduous. For example, uncertainly keeps companies from investing in the long-term, and that includes adding permanent workers. Just a week after the Fed released its statement delaying the expected rate hike in which they indicated that there was major uncertainty created because of international events, Chairwoman Yellen was out speaking about the probability of a rate hike this year -- “Most FOMC participants, including myself, currently anticipate...an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter,” Yellen said. The Fed just can't keep talking about and then taking no action without creating uncertainty. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - September 29, 2015 Real Estate Report - The Fall Real Estate Market Update

Let's take a break from speaking about the Federal Reserve for a week and talk about a more pleasant topic. Thus far this year, the real estate market has been strong. This year continues the sector's recovery from the recession we suffered almost a decade ago. It has been a long, hard road for the recovery and real estate in particular, but we have seen a slow and steady recovery in the sector for some time. Last month we saw existing real estate sales dip by almost five percent from the previous month, but sales are still up over six percent year-over-year. We are now in the fall real estate season and it seems that the most important factor holding back sales is lack of inventory in some areas of the country. This lack of inventory makes the ability of builders to gear up to increase production very important. And their major concerns are lack of affordable land and lack of skilled labor. Though lack of inventory, affordable land and skilled workers are real problems, they demonstrate that we have come very far in our recovery. Instead of complaining about lack of confidence, jobs and available credit, as we were just a few years ago, the problems we face are very different today. They are problems that a stronger economy face. Today, if an attractive home goes on the market at a reasonable price, it more than likely will sell. Thus, if you are thinking about listing your home, conditions are favorable. And if you are thinking about purchasing, today's low rates still make ownership a bargain. Next week we are sure to be talking about the Federal Reserve again, as the jobs report is released on Friday. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - September 15, 2015 Real Estate Report - How About Some Perspective?

Last week we talked about how times can change from week-to-week. With regards to the somewhat "disappointing" jobs report released recently, we have to reach back almost a decade to understand how our perspective changes over time. The economy lost approximately 8.7 million jobs during the Great Recession of 2007 to 2009. Since that time, the economy has added over 11 million jobs. The unemployment rate peaked at 10.0% in October of 2009. It currently stands at 5.1%, near the 4.5% bottom it hit before the recession took place. Keep in mind that this does not mean we have recovered completely. During this time the country has added tens of millions to our population and therefore we have not recovered all jobs lost. Why is this perspective important? Because the Federal Reserve Board will be considering long term trends when they make a decision regarding raising rates this week. Yes, the latest report is important, but not as important as where we are headed. And therein lies the problem. The Fed can't predict where we are headed either. For that the Fed would need a crystal ball and they don't have one of those. Certainly, the gyrations of the stock market will be considered by the Fed. And not only our stock market, but markets all over the world and especially in China. Is our market correction due to the possibility of the Fed raising rates or the fear of an economic slowdown spreading to our shores from overseas? One trend should be noted: short-term rates have risen during the past several weeks and this tells us that the markets are expecting some action from the Fed. Though short-term rates are not as "visible" to the consumer as longer-term rates that determine the value of fixed rate home loans, short-term rates do determine adjustments for those having variable rate home loans and this trend bears watching. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - September 8, 2015 Real Estate Report - My How Times Change

You may be thinking that we are talking about how the world has changed over the years. For example, who would have thought that a conversation with our children would most likely occur through texting on a machine that many of us did not even grow up with years ago? Here we are talking about how things change from week-to-week. During the past few weeks we have been illustrating factors before and against a rate increase orchestrated by the Federal Reserve Board, whose "Open Market Committee" meets next week. On the plus side we had a strengthening economy and the creation of jobs. On the negative side we had a correcting stock market, a stronger dollar, a slowing economy overseas and plunging oil prices. In just a couple of days, the stock market rebounded significantly, we had a significant upward revision in the estimate for our economic growth in the second quarter and oil prices rebounded sharply as well. In a matter of a few days, we went from not at all expecting a rate increase to thinking that a rate increase could happen. Just to make things interesting, a few days later, stocks and oil prices reversed again. If you are confused, think how the Fed must feel considering this decision. And then came the jobs report. What did the jobs report tell us? Even though the addition of 173,000 jobs was less than expected, the unemployment rate dropped to 5.1%, the previous month number of jobs added was revised upward and wages grew a bit more than predicted. Overall, this report is a positive one for the economy and, therefore, increases the chance of a rate increase next week. Most analysts are putting the chances of an increase at 50-50 right now. Though, one thing we can tell you is that the Fed does not like major uncertainty. And there is plenty of uncertainty out there right now. Too much uncertainty may be the overriding factor determining the results of this decision. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - September 1, 2015 Real Estate Report - The Correction Adds Another Variable

Last week we spoke about the factors the Federal Reserve Board must balance before making a decision about rates. This week we can add one more factor, a stock market correction. This year the Dow peaked at 18,286 in May. When we wrote our column regarding the fact that the markets were due for a correction on July 14, we were still around the 18,000 level. On August 25, the Dow closed at 15,666. That is a drop of well over ten percent, the standard of what is considered a correction. What is causing the "adjustment"? There are plenty of possible factors, including the more severe drops in international markets, especially China. Other possible factors would be the devaluation of overseas currencies or the specter of coming rate increases. Or it could be, as we mentioned in the July 14 article, that we were just due for a correction. Markets can't move straight up forever and this run without a correction has been way longer than average. We also don't know that the stock market will not bounce right back, which it started to in the middle of last week. But if it doesn't, we expect a nervous stock market also to weigh on the Fed when they meet in a few weeks and consider a rate hike. The markets do not like uncertainty and there is plenty of uncertainty out there. In the meantime, the stock market's correction has added the benefit of helping keep rates low for a while longer, giving more time for Americans to enjoy this added benefit. But don't get too comfortable, because this week's jobs report is about to add another factor into the mix. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - August 25, 2015 Real Estate Trends - The Dollar, Oil Prices and Rates

For months the markets have been totally focused upon how many jobs are added each month and how this might bring us closer to increases in rates. It is obvious that every month of more than 200,000 jobs added gets us closer and closer. But employment is not the only variable affecting the Federal Reserve Board's thinking. This month when China devalued their currency in a move they said would let market forces set the value, one of these variables was front and center. This variable is the value of the U.S. dollar. Why do we care about the value of the dollar? In the past year, the value of the dollar has gotten considerably stronger than other foreign currencies. This is actually good news because our economy seems to be getting stronger while others languish. To a consumer a stronger dollar is good because it lowers the cost of goods bought overseas and even makes vacations cheaper. It is bad for U.S. companies that do business overseas because our exports become more expensive. So a stronger dollar is a double-edged sword for our economy and thus the Federal Reserve Board. Overall, a strong dollar is good because it lowers the risk of inflation. And inflation is exactly what the Fed is looking to protect us from when they raise rates. With oil and gas prices going down and the dollar getting stronger, the risk of inflation is going down. Plus, the risk to our economy is rising and the recent drop in our stock market certainly reflects worries concerning this risk. The question is-will these factors convince the Fed to wait longer before they raise rates? At least for now, we have the best of all worlds -- a recovering economy, low rates, low gas prices and cheaper vacations to Europe! Keith Stewart 708-925-2562

Chicago's Mortgage Choice - August 11, 2015 Real Estate Report - The Fed and Employment Data

The Federal Reserve's Open Market Committee met at the end of July. While they did not give a date to raise interest rates, they sounded optimistic that things were improving -- "The labor market continued to improve, with solid job gains and declining unemployment," the Fed statement said. And they are getting the markets ready with statements such as these: "The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market." Thus the importance of last Friday's employment data. There are only two reporting months for jobs between now and the next meeting of the Fed. Friday was one of these dates. What did it show? A solid gain of 215,000 jobs and a steady unemployment rate of 5.3%. Meanwhile, the labor participation rate remains stuck at a 62.6%, the lowest since the 1970's, and wages grew 0.2% last month, consistent with the growth of the past year. This data definitely tells us that, while we are creating jobs, we still have a long way to go with regard to wage growth and job market participation. The report brings the Fed closer to raising rates, but does not make an increase in rates in September a certainty. We must emphasize again that the Fed raising short-term interest rates does not necessarily mean that rates will skyrocket tomorrow. On the other hand, it will tell us that our era of record low rates is likely over and those who are looking for a better time to finance a major purchase such as a car or a home had better get moving. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - July 28, 2015 Real Estate Report - Lower Gas Prices on the Way?

Even before the Iran deal was announced, market analysts were predicting that lower gas prices were on the horizon. Certainly, the optimism over the Iran deal has increased this speculation. In reality, the deal might help more Iranian oil get to western markets, yet we know that this agreement still has to go through the "political process." That does not stop optimism, and CNN/Money recently published a story saying that we could see gas prices at $2.00 per gallon, especially after the summer driving season comes to an end. Again, even without the deal being implemented, analysts were bullish on lower gas prices as world production was rising. The next question is--will that hurt or help our economy? On the plus side, lower gas prices should bolster consumer spending, while lowering the threat of inflation. This could help moderate future rate increases. On the negative side, our energy sector would be negatively affected and areas dependent upon those sectors would be hurting as well. The overall effect would definitely be positive. We should remember that the energy sector affects all industries. There has even been a recent study that has indicated that falling gas prices can shorten the time it takes a house to sell and can increase the selling price. The study was published by Florida Atlantic University and Longwood University. We certainly understand that lower gas prices can affect demographics with more moving closer to cities when gas prices are higher. Will gas prices fall and by how much? That remains to be seen but the possibility is intriguing. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - July 21, 2015 Real Estate Trends - Could Rising Rents Hurt Ownership?

The prevailing opinion is that rising rents will cause more consumers to purchase homes. This is absolutely the case as you have seen statistics published time and time again that show it is actually cheaper to own in most areas of the country as opposed to renting. In addition, the stats continue to show rents rising from month-to-month and year-to-year. So how could rising rents hurt home ownership? If you are a renter, you are likely spending a greater portion of your income towards your rent. Therefore, as rents rise, it is harder and harder to save for a down payment. That is why many Millennials are staying at home with their parents and when they move out, they are purchasing instead of renting. But for others, it gets harder. What does this mean? For most, it means that the faster you become a homeowner, the better. Once you are a homeowner, you are protected from inflationary increases in payments as only a small portion of your payment (taxes and insurance and association fees) is subject to annual increases. Eventually, more apartments will be built and the rent/ownership equation should even out. For now, we are seeing first time homebuyers starting to awaken to the fact that sooner is better with regard to home ownership. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - June 16, 2015 Real Estate Report - Here Comes The Fed

For a period of time which was unprecedented, the meetings of the Federal Open Market Committee of the Federal Reserve Board meant nothing to the average American and the markets. After the financial crisis hit, the Fed moved rates down to historic lows. And when the economy was slow to recover, the Fed kept fiscal stimulus going by purchasing the mortgage backed securities and Treasuries. Yet, after this was accomplished there was not much to do until the economic recovery started moving. The economy is producing over two millions jobs per year and now that the economic recovery is much more solid, the Fed is back in the news. Last year, they stopped the aggressive purchase of securities. And now it is inevitable that they will start raising short-term interest rates as the recovery continues to get stronger. Chairperson Yellen as much as guaranteed it in a speech last month. Thus, all eyes will be on the FOMC meeting as it convenes today. In general, we are not looking for the Fed to raise rates this week. But we are looking for a better indication as to when they might make a move at a later meeting, now most likely in September, after the second quarter economic data is released. The markets are already speculating as to how quickly the second move may come. In other words, when rates start up again, how fast will they move? Keep in mind that the Fed directly controls short term rates but only indirectly affects long-term rates through their actions. And long term rates have already started their move upward in anticipation of the Fed's moves. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - May 19, 2015 Real Estate Trends - Rates Are Still Low

Sometimes we lose our perspective. While rates on home loans have been increasing for the past few weeks, if you read the headlines, it seems like rates are really high right now. They are not. According to the Freddie Mac survey of home loans, the 30-year fixed loan averaged over 5.0% every year from 1975 until 2010, a period of 35 years. That is a generation in which rates have averaged over 7.0% in the long haul. It is only since the financial crisis hit that rates averaged below 5.0% and for the past five years, the average has been a little over 4.0%. Yes, there were a few periods where rates dropped below 4.0%, including early this year. However, when you look at the difference between 7.0% and 4.0%, rates are over 40% below where they have been historically. This is why renting is more expensive than owning right now in most areas of the country. There is another message here that we have been delivering for a while. These low rates are not expected to last forever. Every time rates increase as they have in the past few weeks, we ask ourselves--is this the end of the super low rates? We hope not. However, we keep cautioning our readers that rates are great right now and if you are thinking about purchasing a home, refinancing or even purchasing a car, now is an excellent time. You never know when this sale on money will end. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - May 12, 2015 Real Estate Report - The Three Bears Jobs Report

After a disappointing March jobs report, we will go back to the old nursery library to describe April's numbers. Everyone knows the story about the three bears and Goldilocks. One chair was too big and one chair was too small. But the last chair was "just right." We think that an increase of approximately a quarter of a million jobs for April is just about right as well. Why is that? With regard to the Federal Reserve Board raising interest rates, the last quarter of 2014 had the economy adding an average of over 300,000 jobs per month, or just about a million for the quarter. If that level had continued, the Fed probably would have raised rates by now. The first quarter of this year, we added just under 200,000 jobs per month. While not shabby, it is just not enough jobs to keep the economy improving fast enough. Thus, 223,000 jobs is just right. Not too fast to scare the Fed and strong enough to move the economy forward. This is especially true considering the fact that hourly wage growth was lower than expected. However, the good signs included an increase in the labor force participation rate and a decrease in the unemployment rate to 5.4%, the lowest since May of 2008. Leading up to the report, rates and oil prices increased pretty steeply. While this report may give us some breathing room, it reminds us that these ridiculously low rates will not be with us forever. For those who are thinking of making a purchase, you may be well advised to move quickly before Goldilocks grows out of that chair. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - April 21, 2015 Real Estate Report - Are The Markets Moving On?

The Federal Reserve Board has said it again and again. They are raising rates this year. While we still don't know at what meeting the increase will come, the markets have had plenty of time to get used to the fact that rates are going up. So now we find that the markets are now obsessing about what comes next after the Fed fires its first salvo. When will the second move come? How far and how fast will rates be ratcheted up? For their part, the Fed is trying to calm the markets in this regard. For example, Chairwoman Yellen last month made it clear that there will be plenty of notice to the markets before the first increase and that the Fed will not be "impatient" with regard to their moves because the economy is not where it needs to be --- "If underlying conditions had truly returned to normal, the economy should be booming," she said. Investors are anxious about the Fed raising interest rates later this year for the first time in about a decade. But Yellen continues to strongly hint that the Fed won't push interest rates significantly higher anytime soon. (CNN/Money) Periodically, we remind our readers that the Federal Reserve Board directly controls short-term interest rates. When they raise these short-term rates, it does not mean that long-term rates are going up in direct response. It depends upon how the markets perceive the move. The key factor here will be inflation. If the Fed is moving slowly while the economy is heating up and we see signs of inflation, long-term rates could rise faster than short-term rates. If the markets perceive that the Fed is moving ahead of the inflation curve, long-term rates could move more slowly. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - April 7, 2015 Real Estate Trends - So, How Was It?

With all the buildup we gave the March unemployment report, the next question is...how was it? Was it really as important a release as we have described? Generally, the jobs data is very important, but this report had the potential for real impact coming on the heels of six months of strong jobs data and being released two weeks after the Federal Reserve Board's Open Market Committee considered how quickly they should raise short-term interest rates. The result was good news with regard to the upcoming rise in interest rates in the form of bad news from the labor sector. The increase of 126,000 jobs was just about half of what was predicted by economist ahead of time. In addition, the previous two months of data were revised down by almost 70,000 jobs. The unemployment rate remained steady at 5.5%. In response to the weak report, market analysts seem to be pointing their fingers at the bad weather we experienced in February, as well as layoffs in the energy sector, by way of explanation. We will note that one soft month does not indicate a trend, especially during a rough winter month and with data that is often revised the following month. But the results will give the Fed some hesitation. What could save us from an imminent rate hike even if this report was a one month anomaly? A strong dollar and low oil prices both lower the threat of inflation. In addition, wage inflation, which remains muted for now, is as important as the number of jobs we create. The key is inflation, or more precisely, the lack of it. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - March 31, 2015 Real Estate Report - A Crucial Employment Report

Every month the employment report is very, very important. The creation of jobs not only tells us how the economy is performing, the report also tells us how the economy will be performing in the future. When we create a significant number of jobs, we know that these jobs will create more jobs because those who have become employed will spend more money on a variety of goods. This week, we feel that the March employment report is even more important than usual. Why? For one, after the creation of almost 300,000 jobs per month over the past six months, we know that the Federal Reserve Board is getting closer to raising short-term interest rates. Any number close to 300,000 this month may move the Fed to a tipping point. In their most recent meeting the Fed removed the word patience from their guidance but at the same time, indicated that they will not be "impatient." Secondly, we are looking at another number besides the number of jobs created. We are looking at those who have removed themselves from the labor force as a result of the recession. If some of these folks start coming back into the labor force, the unemployment rate could increase or at least stay the same even with a significant number of jobs created. If the economy produces a plethora of jobs and the unemployment number stays steady or rises, this would actually be good news. It means that our economic recovery is finally starting to reach mainstream America. The low labor force participation rate is one reason the Fed has been able to hold off raising rates for so long into the recovery. It is also one reason that wages have not risen as jobs have been created. Hopefully, this will soon change. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - March 17, 2015 Real Estate Trends - We Call a Bottom

It is not often that we go out on a limb and make a prediction about the future. That is because one of our favorite sayings is -- you can't predict the future. However, sometimes we just can't resist. What bottom are we predicting? The rate of home ownership in America. It has been falling for nearly a decade and in the fourth quarter of 2014, it hit the lowest level in over two decades at 63.9 percent, according to the National Association of Realtors. The peak for the home ownership rate was just under 70% during the real estate boom. Why is it going up from here? There is a plethora of reasons. For one, it is getting easier to own a home because credit standards are lower. Secondly, the cost of renting keeps going up and it just makes more economic sense to own. When renting is more expensive than owning, before the benefits of tax deductions and the forced savings of principal reduction are taken into account, then the economic message can't be ignored. The most important reason? The time is right. More jobs are being created and that means the rate of household formation is increasing. A report recently issued by the Lusk Center For Real Estate at the University of Southern California indicates that we are now at pre-recessions levels of household formulations. That means that the Millennials are moving out and they will need places to live. The first quarter of 2015 statistics have not been released yet, but we think we are at or near the bottom and the rate of ownership will rise from here unless there is a major intervening economic variable. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - March 3, 2015 Real Estate Trends - Is it Spring & Jobs Report Time Already?

It sure doesn't feel like spring on the east coast. However, our calendar tells us that it is March and this week we have two important events -- Daylight Saving Time starts this week, which means we must turn our clocks forward and we have another jobs report being released. It seems like we just had a jobs report to comment on, but we must remember that February is a short month. The jobs data has been so strong lately, our guess is that projections are starting to creep up. There was a time not long ago in which 200,000 jobs added was considered a fantastic month. Now 200,000 may be considered a disappointment. If we continue to add jobs at the rate of 250,000 per month, it is possible that the Federal Reserve Board will raise short term rates more quickly than anticipated. Evidence the fact that rates moved up significantly during the week of the last jobs report. The move was not enough to shake the markets nor enough to deter consumers from purchasing homes. However, that does not mean another strong report could not move rates up another notch. The real estate data released in the past week was not especially strong with existing sales slightly lower than expectations and new home sales slightly higher than expectations. Even though the data was not strong, the numbers continued to be improved on a year-over-year basis -- thus the market is moving in the right direction and the very strong pending home sales numbers released on Friday confirms that assessment. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - February 24, 2015 Real Estate Trends - The Surging Dollar

In the past few months, we have focused upon many factors affecting the economy. These have included low oil prices and interest rates. The same international economic and political factors which have pushed rates and energy prices lower and contributed to volatility in the stock market, also have caused the U.S. Dollar to surge to levels not seen for years. There are many positives associated with a stronger dollar. For one, our dollar is strong because our economy right now is stronger than many other countries, especially Europe. In addition, a stronger dollar makes imports and travel cheaper, which lowers the threat of inflation and helps keep our interests rates low. However, there is a negative side of a strong dollar. Because our exports become more expensive to foreign nations, it can slow our economy and cost us jobs. Like everything in life, each economic factor creates balances. If our economy is stronger than others, the stronger dollar can bring it down a notch. Here is the good news. With low oil prices and interest rates, the consumer has a chance to be an economic star in 2015. The creation of more jobs and low rates could very well turn into great news for the real estate market in 2015 and thus offset the negative effects of a stronger dollar. Meanwhile, it is a good time to book a hotel room in Europe and many other places. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - February 17, 2015 Real Estate Report - Have We Hit Bottom?

Usually, when we hear that someone or something has "hit bottom" -- that is a good thing, because the only direction that person or thing can go from there is up. On the other hand, if we are talking about oil prices and interest rates, hitting a bottom might not be considered a good thing. For example, if you were looking for gas prices to hit $2.50 per gallon, they are not going near that price if we have indeed already hit bottom. Indeed, there is some evidence that oil prices bottomed around $45 per barrel. We are not surprised by the fact that oil prices rebounded to the $50 per barrel range because they had fallen so far and so fast. Often markets overshoot the fundamentals and come back to be in balance. Are oil prices going back to $100 per barrel? We have no idea because we can't predict the future. However, most likely the price will settle somewhere in between $45 and $100 without some major intervening economic or political variable. Interest rates too have been falling for the past few months. Not as precipitously as oil, but one must remember that rates were already very low. The fact that rates went back to the record low levels hit two years ago, was quite extraordinary and certainly not predicted. Like oil, we are not surprised that rates have rebounded somewhat. If a few weeks ago was the bottom, there will likely be a rush of those who waited too long. When homeowners and buyers realize that, we expect there to be lines forming to refinance or purchase a home. The question is -- is there still time to get in front of the line? Keith Stewart 773-529-7000

February 10, 2015 Real Estate Trends - The Employment Report is Released

For the first part of the year, the focus has been international news, rather than domestic economic reports. Not that we have not had our share of news, including the first meeting of the year for the Federal Reserve Board's Federal Open Market Committee (FOMC). The statement from the committee indicated some of the same emphasis on international news. This news has included increased economic stimulus in Europe where the economies continue to struggle. The stronger dollar and low price of oil are also affecting overseas economies -- as well as our own economy. It is unlikely that our interest rates would not be so low without the world-wide economies continuing to languish. The question is, will our economy continue to thrive through all of this world-wide economic and political turmoil? Thus, January's reading of the jobs situation released on Friday was all-important in this regard. What did the data show? It showed that our economy is continuing to strengthen as the world slows down. More jobs were created than expected, the previous months were revised even higher than originally reported and hourly earnings showed a healthy jump. Even the higher unemployment rate was seen as a positive as this was due to more job seekers entering the market. Any increase in the labor participation rate is viewed as a sign of an increasingly confident consumer. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - January 27, 2015 Real Estate Report - The Best of ALL Worlds?

For the past few months we have been alluding to a scenario in which our economy could be experiencing the best of both worlds. For years we have been wading through a very slow and tedious recovery from the deep recession. We knew at some point we would reach a tipping point which is called the "virtuous cycle." It now appears that we may be at the beginning of this virtuous cycle and the first measure of economic growth for the fourth quarter last year -- which is released on Friday -- will be a good indicator of whether we are closer to this cycle, since it follows a very strong reading for the third quarter of last year. The weak retail sales report for December gives us some concern about this economic release since this report covers the holiday season. Despite this, we are expecting the economy to eventually shine. What we were not expecting was the potential for lower interest rates and dramatically lower oil prices at the same time. Theoretically, when the economy gets stronger, rates and oil prices should rise. As we have mentioned, international factors have contributed to a changing of the paradigm from our Nation's perspective. And we must say, the American consumer deserves some better than expected times after several years of recession and a tediously slow recovery. So, the next question is, how long would these good times last? We can't predict how strong the economy will get and for how long. But the more the economy heats up, the more likely that rates and oil prices will rebound. For now, it is a good time to take advantage of this situation, whether you are thinking about purchasing or refinancing real estate or purchasing a car. If you do, we have a feeling that you will not be alone. Keith Stewart 773-529-7000

Chicago's Mortgage - January 20, 2015 Real Estate Trends - Wild January

In the past two weeks we have gone over a review of 2014 and also presented some predictions from economists for 2015. However, no one could have predicted the wild ride the markets would have in January. In early January, after just a few days, we looked like we were headed into the long-awaited stock market correction. It took only a few more days of strong rallies to ease those thoughts for a few days, and then the markets reversed course again. Oil prices are down substantially. And while that may hurt some foreign countries, some stocks and certainly the oil industry, it helps the average consumer. If you consider the peak of oil in 2014, the cost to fill up your car has been almost cut in half. That is a lot of savings. Long-term interest rates are also down which translates into more savings for the consumer. For example, by mid-January rates on home loans were the lowest in more than 18 months. More and more consumers are refinancing home loans and garnering major savings. Lower oil prices and lower rates? The economy must be really hurting. Yet, the December jobs gains tell us that the opposite is true. We just finished a year in which the economy added almost three million jobs, the best year since 1999. On the face of it, rates should be increasing when economic growth picks up. There are many factors holding rates down and most of them are international. The economies in Europe, Russia and in many other countries are not strong. One must remember that we are now in a world economy. Even our growth is uneven with certain states faring better than others and the world is the same way. For our citizens in general, it is a win-win situation. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - Real Estate Trends - Unbridled Optimism - January 13, 2015

Unbridled Optimism We move into 2015 with a flurry of projections to analyze. If we could summarize these projections using one word, that word would be -- optimism. The predictions for the most part seem to be optimistic with regard to economic growth for the next year and that includes the real estate markets which actually lagged the overall economy last year. Here are a few samples of the words used by these prognosticators--- • "The U.S. economic outlook looks brighter, with growth likely to be somewhat above the trend of the past five years," New York Fed President William Dudley; • "Many of the gains that we recently predicted in the realtor.com® 2015 Housing Forecast are built on housing growth established in 2014,” Jonathan Smoke, realtor.com®’s chief economist; • "The housing market is likely to continue its gradual climb upward next year after a sub-par 2014. We anticipate a fairly strong increase in housing starts in response to stronger employment and some improvement in related household incomes," Fannie Mae Chief Economist Doug Duncan. Before we jump on the bandwagon, we must remember that no one can predict the future. As a matter of fact, we had similarly robust predictions about growth in 2014 at the end of 2013. The severe winter of 2013-2014 put a wrench in those predictions. Usually, predictions are based upon what is happening right now. The fact that the U.S. economy grew by 5.0% in the third quarter gives us optimism for 2015. So did the pace of job creation in November. Thus, December's job's numbers became important with regard to momentum going into the year and the numbers did not disappoint. The 252,000 jobs capped a year in which we added very close to three million jobs, which is the most in 15 years. Thus, not just optimism, but unbridled optimism. Keith Stewart 773-529-7000

January 6, 2015 Real Estate Report - Looking Back

Next week we will spend some time sharing predictions for 2015. But first we want to take a look back and see what happened in 2014. We started the year with a severe winter and a slowdown within the economic sector. We ended the year on an upswing best exemplified by the recently revised estimate for economic growth in the third quarter. The five percent growth rate was the strongest in over a decade. Though we are not expecting that the number for the last quarter of the year will come in at that level, there is also no evidence of a sharp slowdown in the rate of growth for the last quarter of the year. Employment growth picked up nicely in 2014. Well over two million jobs were created last year and the unemployment rate dropped almost one percent to below six percent with December's numbers still to be released. Inflation stayed tame this year and wage growth did not pick up significantly -- thus all was not a bed of roses with regard to the employment sector. On the other hand, the low inflation rate enabled mortgage rates to stay low throughout 2014 and oil prices dropped significantly, especially in the second half of the year. Meanwhile, the growth in the real estate market slowed somewhat in 2014. The pace of real estate sales leveled off and price gains were more moderate that the previous two years. As we have emphasized, the adjustments in the real estate sector are mainly related to the drop in distressed sales, which is actually a sign of normalization. Finally, the stock market was volatile but marched upward for most of the year as the bull market continued. This year's gains of over ten percent for the S&P Index has contributed to a gain of well over seventy percent during the past five years -- completing the stock recovery from the financial crisis lows of March of 2009. To illustrate, the Dow closed at a low of 6,547 in March of 2009 and finished 2014 close to 18,000, which now represents the fourth longest bull market in history Keith Stewart 773-529-7000