Tuesday, October 27, 2015

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

Tuesday, October 13, 2015

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

Tuesday, October 6, 2015

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