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