Tuesday, December 29, 2015

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

Thursday, December 17, 2015

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