December 12, 2017 Real Estate Report - Taxes, Jobs and Rates

We promised a busy December and certainly we have not been disappointed in this regard. We entered December with the tax legislation flying through the Senate faster than anyone would have predicted. This is not to say that the work is finished, as there are many differences between the House and Senate versions -- differences that must be reconciled in conference before the final package is put to a vote. While it seems like there are a few weeks left in the year, the holidays make it a very short month to get this accomplished. Though you can see that the stock market seems to be very optimistic that it will get done. Then we had the jobs report released. The economic numbers leading up to the report had been strong, and this had resulted in some optimistic expectations. In reality, the number of jobs created was even higher than expected. The unemployment rate of 4.1% keeps us near full employment and wage inflation continued to be tame. In addition, the average work week increased to 34.5 hours from 34.4 hours and 18,300 temporary workers were added. Taking the data into account -- along with the specter of a tax package passing -- there is little doubt left that the Federal Reserve will not be raising short-term rates this week. The announcement will be coming Wednesday afternoon and the Fed should be comfortable that the economy can withstand another increase as it returns rates closer to what it considers "normalcy." The stimulus of a tax cut will also place the Fed on high alert with regard to the threat of future of inflationary pressures. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - October 3, 2017 Real Estate Report - Clouded Jobs Report

The jobs report is a very significant economic indicator. Yet, it seems that every monthly jobs report takes on some extra form of significance. This one is certainly no exception, with the report coming in the midst of the recovery from two natural disasters hitting major population centers within the United States. Hurricanes Irma and Harvey caused major damage to some of the largest states in America -- Florida and Texas -- as well as affecting several other population areas. Along with major damage, lives were changed radically. It is anticipated that we will certainly see the effects of these disasters in our economic numbers, and the jobs report should be the first major indicator. It was no surprise that initial claims for unemployment were up in the weeks after the hurricanes hit and that these additional claims were concentrated in the affected areas. The numbers may not be affected radically on a national level, but there are likely to be major changes regionally and these will affect the national numbers. How much? We will know by Friday. The good news is that these numbers should be temporary, as many jobs will be created in the rebuilding of affected areas. So, the markets will be prepared for one or two down months, but should be anticipating a rebound pretty quickly. The Federal Reserve Board meets two more times this year and most are expecting one more rate increase in December. The size and extent of the damage and rebound may very well be one of the determining factors in this decision. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - September 26, 2017 Real Estate Report - Amazing Resiliency

Earlier this month, the bull market in stocks became the second strongest in history with a gain of over 260% from the bottom reached in 2009. It was already the second longest bull market in history. This is still way short of the strongest bull market in history, which achieved gains of almost 600% for the period of 1987 to 2000, but still very, very impressive. The secret to this market's success? Steady growth with low inflation. Of course, you can also add that this bull market followed precipitous drops during the financial crisis and thus much of it was clawing its way back up. Regardless of where it has come from, stocks have moved a long way through significant challenges and the question on everyone's mind is -- how long can this rally go on? As you would guess, there are opinions on both sides, with many analysts saying there is room to run, and others saying that stocks are being inflated by artificially low rates courtesy of the Federal Reserve Board. The Fed met last week amid this rally, but at the same time also had to consider additional challenges, such as national disasters and a ramp-up of international tensions. The Fed's decision to keep short-term interest rates unchanged and begin the paring of assets in October was right in line with pre-meeting expectations, though some had hoped for a delay based upon the recent challenges. Is the Fed justified in keeping rates so low, or should they hold off on the next hike expected in December -- until they see how well our economy recovers longer-term from the hurricanes which have hit so hard? Only time will tell, as we cannot predict the future any better now than we could in 2009. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - September 19, 2017 Real Estate Report - Significant News for the Fed

Meetings of the Federal Reserve Board are very news worthy for the markets by themselves. On the other hand, thinking about how much news and data the Fed has to consider before they make a decision regarding interest rates and other activities is almost mind boggling. It is not as if they look at the jobs data and make a decision based upon that report. There are hundreds, if not thousands, of points of data to consider. Add the current events happening today, and one would not want to be in that decision-making position. Between Korean nuclear tests, Hurricane Harvey, Hurricane Irma, legislative and administrative actions, and more; there is no lack of information which might influence the Fed. In other words, the economic data is very complex, but adding all these other factors make the decision-making environment totally convoluted. Before the current events intervened, the betting line was that the Fed would announce tomorrow that they will start paring down their assets -- most likely starting in October. They were expected to hold open the possibility of raising rates again before the end of the year, but were not likely to act at this meeting. We believe that the current events make it even less likely that the Fed will raise rates at today's meeting and the decision to start paring down in October may still stand, but even this expected move could be delayed. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - September 12, 2017 Real Estate Report - America is Tested Again and Again

All through our economic commentaries we always are fearful of making predictions. No matter how much information we have, there are always unknown factors which can change the future to a significant degree. There is no better example of this than what Texas and Louisiana just faced with Hurricane Harvey. An entire region of our country devastated with an amazing amount of support pouring in throughout the country. There is no doubt about the fact that this natural disaster will have a major effect upon our economy -- as well as Irma and whichever storms follow. From the devastation of local economies to gas prices, there will be a multitude of factors we will be facing. In the long-term there will be an economic revival as we rebuild lives, houses and infrastructure. We have rebuilt successfully before and we will rebuild again. America has always demonstrated our resiliency. However, there are major questions which will remain far beyond this event. For example, we all know that houses are expensive to build and "excessive" regulations are part of that equation. On the other hand, as the insurance companies continue to point out, the lack of adequate building and zoning standards in some areas of the country have increased the cost of rebuilding significantly. In other words, we have some very hard questions to address, questions which are very difficult to answer. And coming out with the right answers will help us pass this test in the future long after we rebuild this time around. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - August 29, 2017 Real Estate Report - Fall Forward

Though the calendar states that fall comes later in September, Labor Day weekend is actually the real end of summer for most Americans. It means back to school for the kids and the end of vacation season. Congress is back in session after their August recess. Though many think that Congressmen go on vacation during recesses, most are back in their districts meeting with their staffers and gauging the temperature of their constituents. Fall starts the second homebuying season of the year. Though not as strong as the spring season, the fall is a time that people list their homes and want to be settled in a new home before the holiday season arrives. This fall we are hopeful that more are listing their homes because the market has been constrained by a listing shortage. Before we go out to enjoy the Labor Day weekend, we will have something of an economic report anomaly. Since the first day of September is on Friday, the employment report will be released early before the holiday weekend starts. Many will be on vacation this week and others will be leaving early for the holiday. Thus, the markets may be prone towards more volatility if there is a surprise in the report. If there is a surprise, it will be like saying -- Surprise, we had ___ jobs added. Have a nice holiday weekend to think about it! Keith Stewart 773-529-7000

Chicago's Mortgage Choice - August 22, 2017 Real Estate Report - Saber Rattling

Last week we spoke about the Dog Days of Summer when things are expected to be quiet. On the other hand, we also indicated that the world does not take vacation in August and unexpected events can have a greater affect upon the markets when so many are on vacation. And so it is with regard to the North Korean situation. Thankfully, thus far this is not an event, but a heightened course of saber rattling threatening all sorts of things. Of course, we were all hopeful there would be no event, and that the sabers would quiet down. But we have seen more volatility in the markets as a result of all of the noise. And the events in Europe late last week just added to the consternation. Even so, the drop in stocks has been miniscule as compared to the rally we have witnessed over the past nine months. Even without these events, one would be quite surprised if there are not more mini-corrections in store for the markets because of how far they have moved to the upside. Another area affected by the noise is interest rates. It is hard to tell whether the recent moderate drop in long-term rates is due to a flight to safety in anticipation of a possible crisis, or a reaction to the news that the economy continues to grow along with reports that are showing inflation continues to be contained. With the markets, we never know why they move, and in this case the easing of long-term rates could be a result of several factors. The move could also be quite temporary. Thus, if you are house or car shopping, you may only have a small window of opportunity. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - August 8, 2017 Real Estate Report - The Economic Expansion Continues

The long road back from the Great Recession began in mid-2009 and July marks the 96th month of recovery. This makes it the third longest expansion on record, and if we continue at the present pace, this recovery will become the second longest expansion in history in the middle of next year. There are two reasons for the length of this recovery. First, the Great Recession was a very deep recession, thus we had a very long road back. Second, the recovery has been slow and steady. Even though our growth has not been strong, we have stayed out of a recession partly because the economy has not overheated. If the economic expansion did heat up, then interest rates would be much higher and this could endanger the recovery. We have enjoyed very low interest rates for the past decade and this year is no exception. Nowhere is the length of the recovery more evident than the jobs market. The economy lost close to nine million jobs in a very short period of time. In the decade that has followed, we have added approximately 17 million jobs. While these are really strong numbers, we have only added eight million jobs net of the recession, and this averages out to less than one million per year over the past decade. This helps us put July's job numbers in perspective. We added just over 200,000 jobs for the month with an unemployment rate of 4.3%, both solid numbers. We still have some work to do in creating better paying jobs and taking care of those who have left the workforce but did not retire. However, we have come a long, long way. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - July 18, 2017 Real Estate Report - The Brexit Adjustment

Sometimes it is hard to explain why certain things happen in the markets. Much of the time the markets seem to have a mind of their own, and market analysts are reaching for explanations as to what happened after the markets moved in one direction or another. Of course, usually there are several factors affecting the markets at once and it is typically impossible to determine which is the dominant factor. For example, let's discuss the recent movement in interest rates. The Federal Reserve Board has raised rates three times in the past six months or so. To the public, this would indicate higher rates to borrow money to purchase homes or cars. But as we have indicated previously, the Fed controls short-term rates and they have an indirect influence on long-term rates. Indeed, the Fed has raised short-term rates by 1.0% overall, but as of a few weeks ago, long-term rates for home loans had barely moved half of that amount. One reason long-term rates have not moved is the fact that the economy is not overheating and there is no sign of inflation. Job growth continues to be solid, but the economy grew by less than 2.0% in the first quarter. Then why did long-term rates start rising more recently? Remember Brexit and how the markets were worried that slow growth in Europe would affect our economy? Well, apparently Europe has shaken off the Brexit worries and growth is stronger than expected overseas. Like here, there are no signs of the European economies overheating. Thus, while rates remain low, the fact that Europe appears to be awakening from their slumber has put some pressure on the bond markets, and thus our long-term rates. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - July 11, 2017 Real Estate Report - Jobs and The Cost of Housing

Last week we counted our blessings with regard to the shape of the economy. This week we will talk about the release of the June jobs numbers which give us another reading regarding the health of the economy. Overall this reading was stronger than forecasts. Thus far this year, job growth has been solid, with just over one million jobs created in the first half of the year. This compares to 2.2 million jobs created in 2016, which puts the economy on track to match last year's numbers. Despite strong jobs growth for the month, the unemployment rate rose to 4.4% last month, but that is not necessarily a bad thing, as it typically means that more long-term unemployed are re-entering the workforce. Just as important as the jobs created, wages increased by 0.2% last month and 2.5% over the last year, which was slightly lower than economists expected. Higher wages are important, because they positively influence consumer spending for big ticket items. For example, if wages do not go up as fast as the cost of housing, this provides a burden on renters and discourages home buying as well. Recently, home price data for April, as measured by the S&P CoreLogic Case-Shiller National Home Price Index, showed another record high -- the fifth consecutive month of new peaks. Does that mean that housing will become unaffordable? We caution you against reaching that conclusion. The First American Real Home Price Index currently shows that housing prices are still around 33% below their peak. To calculate the "real" cost of housing under the Real Home Price Index, incomes and mortgage rates are used to inflate or deflate house prices which are unadjusted for inflation in order to better reflect consumers' purchasing power and capture the true cost of housing. It should be noted that lower interest rates do not directly benefit renters. The message? As long as rates stay low, housing is still more affordable today than it was when peak prices were achieved a decade ago. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - June 27, 2017 Real Estate Report - Half-Way There

We are approaching the half-way point of 2017. We can make an observation that it has been a very strange year. And we are not just talking about the political turmoil. For example, despite the fact that the Federal Reserve Board has raised short-term interest rates for the third consecutive quarter, we still do not have a fix on how strong the economy is right now. In their statement accompanying the increase two weeks ago, the Fed expressed optimism that the economy was getting stronger. Yet, every economic report released that week was disappointing, including readings on retail sales and industrial production. Even though just about everyone was expecting rates on home loans to rise significantly this year, this uncertainty is one reason that mortgage rates are lower than the analysts expected. One would hope that the upcoming June jobs report would lend some certainty to the equation, but thus far this year, we have even seen ambiguity within the employment sector. The unemployment rate is dropping, but the pace of jobs added has not accelerated from last year. Despite this uncertainty, the stock market has remained strong this year as the post-election rally has continued. Does this mean that the markets are optimistic that it is only a matter of time before the economy shows signs that it is picking up? Or is this rally merely a reaction to improved corporate profits? We feel that the picture will become clearer over the next several weeks, as we see additional jobs reports and a reading on the growth of the economy for the second quarter. For now, the lower long-term rates should be helping the economy in conjunction with higher stock prices. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - June 20, 2017 Real Estate Report - The Deed is Done

The Federal Reserve Board's Open Market Committee met last week to consider raising short-term interest rates. As we approached the meeting, the consensus was that the Fed would move their Discount and Federal Funds Rate higher by one-quarter of one percent. The weaker than expected jobs report put a bit of doubt in some analysts' minds; however, most were still expecting the increase to be approved. Thus, no increase would have been somewhat of a surprise and an increase of more than one-quarter of a percent would have been a major surprise. Therefore, the fact that the Fed moved by one-quarter of one percent was seen as somewhat of a non-event. Just as importantly, their statement released at the conclusion of the meeting provided us clues as to what the members thought of the state of the economy. The statement lauded the progress of the economy and downgraded their forecast for inflation. They continue to espouse a gradual rise in rates and, in the fourth quarter, the Fed expects to start selling off some of the assets they have amassed in the past to help the economy. Anytime we are focused upon actions by the Federal Reserve Board, we have to remind our readers which interest rates the Fed controls directly. The Federal Funds Rate and the Discount Rate are rates the Fed charges member banks and member banks charge each other for overnight funds to balance their sheets. Thus, when we indicated that these are short-term rates, they are very short term. In reaction, other short-term rates such as three- and six-month T-Bills are affected most directly. On the other side of the coin, long-term rates, such as home loans, can move in tandem or have a different reaction, especially if the markets feel that the Fed is staying ahead of any threat of inflation. Thus, an increase in interest rates for home loans are not guaranteed to follow suit, though certainly the Fed's action last week does pose that possibility. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - June 6, 2017 Real Estate Report - Cat and Mouse Game

For many years during and after the recession, the monthly jobs report was important to gauge the strength of the recovery. However, during the past two years, the release of the report has taken on a new meaning. Now we are not only measuring the strength of the economy, but also tying that information directly to actions by the Federal Reserve Board's Open Market Committee. If we added 250,000 jobs in a particular month five years ago, that was good news. But we did not have to worry about the Fed raising interest rates as a result of that information. Today, a strong report can lead us to direct action by the Fed. And so it is with the report which came out on Friday. The increase of jobs of 138,000 and the revision of last month's data was seen as weakness. However, the unemployment rate moved to 4.1%, another post-recession low, and monthly wage growth came in at forecast. The question at this point is -- are we approaching full employment, which means we are also experiencing a shortage of labor? This information, taken together with the previous month's report, tells us that there is still a decent chance that the Fed will act when they meet next week, but slightly less of a chance than before the report was released. The meeting will also be accompanied by the release of economic projections which will give us a gauge of where the Fed thinks that the economy is heading in the next several months. Keep in mind that the Fed will be considering other information which measure the strength of the economy. For example, on Tuesday last week, measures of personal income and spending for April came in with moderate strength following weak readings in March. Until the Fed meets next week, we can't say exactly how they will react, but certainly the data we saw last week give us some important clues. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - May 30, 2017 Real Estate Report - Summer is Here

It is hard to believe that we have already celebrated Memorial Day in 2017. Doesn't it seem that this year is going particularly fast? On Memorial Day, we remembered those who died in service to our country, a tradition that goes back as far as the Civil War and was originally known as Decoration Day. While there are ceremonies and parades going on across our country, the average American is also participating in Memorial Day picnics because good weather has finally arrived throughout the country. Yes, the timing of Memorial Day is also the unofficial start of the summer. The kids are heading into their last weeks of school, vacations are starting and many people are moving because of the homes they have purchased during the spring homebuying season. This means that Americans are also meeting their new neighbors and becoming part of different communities -- a very joyous occasion. While we all enjoy the picnics and new homes, we should not forget the meaning of Memorial Day and its roots which came from a time when our Nation was literally torn apart. We mention this because today again our country is divided, and while differences of opinions are part of what makes our Democracy great, we hope that our divides heal over time because the more energy we expend focused upon conflicts, the less we can focus upon progress. Speaking of progress, we may take off for Memorial Day weekend, but the economy does not. We have another reading on our employment situation coming up this week -- always an interesting time for the markets. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - May 2, 2017 Real Estate Report - Which Report Was Right?

This week we will get evidence of which jobs report was an accurate depiction of the current employment picture. The January and February jobs report showed major increases of over 200,000 jobs. The March jobs report showed a relatively modest increase of just under 100,000 jobs. The average for the past 12 months has been about 180,000 jobs per month and, therefore, the quarterly numbers were right on target in this regard. The question is, will we return to the strong numbers of January and February, stay with the lower figure for March, or move back to the norm? If you are confused as to where the true numbers lie, imagine what the Federal Reserve Board must be thinking when they meet this week. They don't get the benefit of April's numbers because they meet before the employment report is released. And yet they must decide whether to raise rates again at this meeting. Most are predicting that the Fed will hold steady at this week's meeting. Until last week, the stock market had cooled significantly since their last meeting, international tensions are higher and the inflation data released recently was decidedly tame. Of course, we can't predict their decision, but the evidence supports this hunch. As we have pointed out in the past, the Fed controls short-term rates and if the Fed acts when the markets are not expecting it, volatility in the bond and stock markets can follow. It will be an interesting week. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - April 25, 2017 Real Estate Report - They Are Back

Congress is back in session. Not that we are 100% sure that anyone missed them, but certainly there is some unfinished business on the table. For the past few weeks, international news has dominated the markets. Syria, Afghanistan, North Korea and Russia have led this domination, and certainly these world conflicts have influenced the markets -- including stocks, bonds, energy prices and the price of gold. This is not to say that domestic issues have fallen off the map, but when Congress is not in town, there will not be news of legislative progress or failures in the headlines. Now that Congress is back, there will be issues that need to be addressed on the domestic side, in addition to Congressional activity on international issues. One domestic issue hits this very week. This Friday, the stopgap funding bill for the operation of the Federal Government expires. Could we see a government shutdown? Most political analysts predict that a shutdown will not take place. However, it is normal for the agreement to come at the last possible hour. And international issues may complicate the agreement with budget requests in place to increase defense spending with a lack of immediate corresponding cuts in domestic programs. While these issues are usually resolved before the government is shut down for anything but a minimal length of time, there is the potential for fireworks and saber-rattling. And if the government does shut down for a few days, could next week's meeting of the Federal Reserve Board's Open Market Committee be delayed? Always an interesting time in Washington. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - April 18, 2017 Real Estate Report - A Stark Reminder

Actually, we have had a few stark reminders recently. The most recent was the escalation of our engagement in Syria and another, a show of force near the Korean peninsula. Since the election, much of America's attention has been focused upon domestic issues such as the health care bill, a nomination to the Supreme Court, budgets and more. But now we are reminded that the world is connected. Connected not only in our fight against terrorism, but also the economics. From Brexit, to a devastating tsunami on the other side of the world, we have been constantly reminded as to how events in one part of the world can affect our part of the world -- both good and bad. Some of these reminders reside on our domestic side as well. Not long after the first attempt at "re-reforming health care reform," we now face a late April showdown which could result in a shutdown of the Federal government. While we are not predicting that this necessarily will happen, it is a reminder of the way Washington works -- contentiously and slowly. This is especially true when major changes are proposed. How does this affect us? We have talked about the surge of confidence that America has experienced in the past several months. It would be natural for this confidence to wane somewhat, as the processes move forward slowly. While this may slow down economic growth a tad, it also gives us the benefit of slowing down the rise in interest rates that market analysts have been predicting. Lower rates would help boost the economy and hopefully offset the cooling off of enthusiasm. While we can't predict the path of rates or the economy, it does not hurt to gain some perspective as to the possibilities, especially when we get hit with news of world and domestic events. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - April 11, 2017 Real Estate Report - Interesting Jobs Data

Every month the jobs numbers are of major interest to analysts who are looking for direction with regard to the economy. In essence, there is no up-to-date economic statistic which is more important, as job growth is the spark which can spur on economic growth, as well as inflationary concerns. In addition, there are certain employment reports that seem to attract even more interest because of other events occurring before, or as the data are being released. March's jobs numbers were no exception in this regard. This month, the numbers took on more importance because of these additional circumstances. For one, the report followed a pretty strong jobs report released last month. Two strong months of jobs growth could have provided a signal to the Federal Reserve Board, whose members will be considering when to raise rates again. To make the timing more interesting, the minutes from the last Fed meeting were released two days before the jobs report. These minutes give us a feel as to how the Fed is likely to react to the numbers, not only with regard to increasing rates, but also regarding paring off their portfolio of bonds and mortgages. The report was also released after the stock market rally hit a pause in the second half of March, which enabled long-term interest rates to ease back down. A strong report had the potential to refuel the stock market rise and higher rates quite quickly. Thus, when the numbers were released on Friday, the increase of less than 100,000 jobs and the downward revision in the previous months' gains, as well as stable wage growth, all seemed to have signaled that the economy is not running too hot -- despite the drop in the unemployment rate. Weather factors may have affected the extreme variations from month-to-month and, thus, one should not be coming to any conclusions regarding one month of weak employment growth. Additionally, it will be hard to measure the immediate reaction to the news with the escalation of the Syrian conflict going on at the same time as the report was issued. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - March 28, 2017 Real Estate Report - Alternative Reality

No, we are not delving into the world of science fiction. We can't change what happened. But sometimes it is interesting to wonder what would have happened if an event did not take place. In this case, we are referring to the Federal Reserve Board raising short-term interest rates. As we have previously explained, the move was a "no-brainer." The markets were surely expecting the increase. Therefore, it would have been a surprise if the Fed held rates steady. The markets don't like surprises. And a layman might have surmised that rates would have come down if the Fed kept rates where they are. Yet, that conclusion is not necessarily accurate. If the markets feel that inflation is becoming more of a threat and the Federal Reserve is not doing its job to rein in inflation, then long-term interest rates could move up even faster than they have already risen. This is why the Fed can raise interest rates at times and long-term rates can actually go down -- though presently short-term rates have not gone up high enough for the analysts to predict that they will halt economic growth. More evidence on the state of the economy is on the way. This week we have a report on personal income and spending, and next week we will see another jobs report. Coming after a strong report for February's data, you can be sure that market analysts and the Fed will be watching closely for evidence that the economy and inflation are heating up. If we see that evidence, there will be speculation that another rate increase will be coming sooner, rather than later. A disappointing jobs report could make the Fed pause and ponder whether they are moving too quickly. That would be bad news for the economy, but good news for rates. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - March 14, 2017 Real Estate Report - The Jobs Report and Fed Meeting

The data is in. The jobs report has been released and the Federal Reserve Board's Open Market Committee is meeting as we release this publication. Keep in mind that the employment numbers are a major factor in affecting the Fed's decision -- but they are not the only factor. The stock market rally, which indicates confidence, as well as inflationary indicators, are also watched closely. As a matter of fact, the numbers on wage growth might be almost as important as the jobs numbers themselves. Last month, wage growth came in 2.8% on an annual basis and this is seen as good news for workers but bad news on the inflation front. Add a strong stock market and rising wage growth to the fact that the economy added 235,000 jobs last month and the unemployment rate ticked down to 4.7%, and you can see why the markets are predicting a rate increase. You might ask why a rising stock market would affect the Fed's thinking. We have already spoken about the stock market's indirect influence upon the economy. Certainly, the growth of equity will make those who own stocks more confident in making large purchases, and this has the potential to boast the economy. However, there is a more direct link between the Fed and the rise in the stock market. The last thing the Fed wants to do is raise rates and stifle the economy. With the stock market so strong right now, the Fed is much more likely to conclude that the economy can withstand the news of higher rates. If consumers are uncertain, piling on a rate increase just makes things worse. If consumers are hopeful, they are much less likely to envision higher rates as a roadblock to success. Of course, this is all speculation, and by the time you read this commentary, you are likely to know what the Fed was really thinking. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - February 28, 2017 Real Estate Report - Jobs and Rates

It has been a whirlwind start to the year with record stock prices and a new administration coming together. And the year could get a bit more interesting with an employment report due out at the end of next week. Of course, the jobs data is always important, but this report could hold a bit more weight with a meeting of the Federal Reserve coming up in a few weeks. The Fed has recently talked about raising rates as much as three times this year, but the markets have been predicting no increase before May or June. Could a very strong jobs report make a March increase more likely? This is certainly within the realm of possibilities and the recent release of the minutes of the last Fed meeting seemed to be somewhat open to that scenario. Keep in mind, even though the economic news released thus far this year has not been significantly stronger than expected, the inflation data reported recently was higher than forecasted. And the Fed is watching the inflation rate very closely while analyzing the economy. In addition, while the economic reports have not been that strong, consumer confidence is up, along with the stock market. There is a possibility that this confidence turns into more jobs created because employers are also feeling more confident. More jobs will boost the economy. In addition to the total number of jobs added, one indicator which will be watched very closely will be wage growth. If wages grow more quickly than expected, this would denote that the job market is getting tighter and would be another factor elevating inflationary concerns. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - February 7, 2017 Real Estate Report - Where the Economy Stands

Certainly, this past week was one to get a good assessment of where the economy stands coming into the new year and a new Presidency. In the past week or so, we have had reports on overall economic growth for 2016; personal income and spending for December; the jobs report for January; and a meeting of the Federal Reserve Board's Open Market Committee. That is a lot of information to assess. Let's start with the economic growth. Our rate of economic growth for 2016 was 1.6%, which was the slowest since 2011. The fourth quarter came in at 1.9% and is subject to revision, but even a significant upward revision will not affect the overall 2016 growth results by that much. The next release measured personal income and spending for December, which was another report which shows how we finished out the year. December personal spending numbers are especially important because they reflect spending through the holiday season. These numbers came in moderately robust, and met expectations. We then had the meeting of the Federal Reserve mid-last week. The markets were not expecting the Fed to increase rates since they did so in December. And this prediction was right on the mark. However, the markets were watching the Fed's statement closely. This statement indicated that economic growth remains moderate and the economy was balanced as of right now--with no more risks on the upside vs. the downside. Finally, on Friday we had the all-important jobs report, which is the first economic reading for January. The report was a real mixed bag with strong employment growth of 227,000 jobs added, but an up-tick in the unemployment rate to 4.8% and lower wage growth than forecasted. The increase in the unemployment rate is not necessarily bad news because it indicates that more long-term unemployed are re-entering the workforce. Indeed, the labor participation rate did increase as well, but remains near all-time lows. Keith Stewart - 773-529-7000

Chicago's Mortgage Choice - January 10, 2017 Real Estate Report - The Employment Situation

We just saw the last unemployment report of 2016. The December numbers came in at 156,000 jobs added for the month, which was a bit lower than expected--but the previous two months were revised upward by almost 20,000. The unemployment rate came in at 4.7%, as expected. Wage growth came in higher than expectations. With the year ending and a changeover in Presidents, it also gives us the chance to see how this important economic indicator is doing, not only for the past year, but for the past several years as well. For all of 2016, the economy gained just over 2 million jobs. This is an impressive number, but it was down from 2.7 million jobs added the year before and 3.1 million jobs added in 2014. In addition, the unemployment rate started 2015 at 5.0% and ended the year at 4.7%. Finally, the labor participation rate started the year at 62.6% and ended the year at 62.7%, virtually flat for the year. It was over 66.0% before the recession hit. Looking back eight years, at the end of 2008, the unemployment rate was 7.3% and reached 10.0% during the first year of the Presidency, when the country was mired in recession. Overall, the economy lost 8.7 million jobs during the recession, which bridged two administrations. Since the end of the recession, we have averaged a net gain in jobs of 190,000 per month, or just under 2.3 million per year. This means we have recovered the jobs lost during the recession and more, but if you average the job gains over 10 years, to include the first stages of the recession, the annual average job gains have totaled much less. In conclusion, we have made up much ground, especially when looking at the unemployment rate. However, there is more work to be done with regards to adding more jobs and increasing the labor participation rate. Keith Stewart 773-529-7000