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