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