Chicago's Mortgage Choice - January 27, 2015 Real Estate Report - The Best of ALL Worlds?

For the past few months we have been alluding to a scenario in which our economy could be experiencing the best of both worlds. For years we have been wading through a very slow and tedious recovery from the deep recession. We knew at some point we would reach a tipping point which is called the "virtuous cycle." It now appears that we may be at the beginning of this virtuous cycle and the first measure of economic growth for the fourth quarter last year -- which is released on Friday -- will be a good indicator of whether we are closer to this cycle, since it follows a very strong reading for the third quarter of last year. The weak retail sales report for December gives us some concern about this economic release since this report covers the holiday season. Despite this, we are expecting the economy to eventually shine. What we were not expecting was the potential for lower interest rates and dramatically lower oil prices at the same time. Theoretically, when the economy gets stronger, rates and oil prices should rise. As we have mentioned, international factors have contributed to a changing of the paradigm from our Nation's perspective. And we must say, the American consumer deserves some better than expected times after several years of recession and a tediously slow recovery. So, the next question is, how long would these good times last? We can't predict how strong the economy will get and for how long. But the more the economy heats up, the more likely that rates and oil prices will rebound. For now, it is a good time to take advantage of this situation, whether you are thinking about purchasing or refinancing real estate or purchasing a car. If you do, we have a feeling that you will not be alone. Keith Stewart 773-529-7000

Chicago's Mortgage - January 20, 2015 Real Estate Trends - Wild January

In the past two weeks we have gone over a review of 2014 and also presented some predictions from economists for 2015. However, no one could have predicted the wild ride the markets would have in January. In early January, after just a few days, we looked like we were headed into the long-awaited stock market correction. It took only a few more days of strong rallies to ease those thoughts for a few days, and then the markets reversed course again. Oil prices are down substantially. And while that may hurt some foreign countries, some stocks and certainly the oil industry, it helps the average consumer. If you consider the peak of oil in 2014, the cost to fill up your car has been almost cut in half. That is a lot of savings. Long-term interest rates are also down which translates into more savings for the consumer. For example, by mid-January rates on home loans were the lowest in more than 18 months. More and more consumers are refinancing home loans and garnering major savings. Lower oil prices and lower rates? The economy must be really hurting. Yet, the December jobs gains tell us that the opposite is true. We just finished a year in which the economy added almost three million jobs, the best year since 1999. On the face of it, rates should be increasing when economic growth picks up. There are many factors holding rates down and most of them are international. The economies in Europe, Russia and in many other countries are not strong. One must remember that we are now in a world economy. Even our growth is uneven with certain states faring better than others and the world is the same way. For our citizens in general, it is a win-win situation. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - Real Estate Trends - Unbridled Optimism - January 13, 2015

Unbridled Optimism We move into 2015 with a flurry of projections to analyze. If we could summarize these projections using one word, that word would be -- optimism. The predictions for the most part seem to be optimistic with regard to economic growth for the next year and that includes the real estate markets which actually lagged the overall economy last year. Here are a few samples of the words used by these prognosticators--- • "The U.S. economic outlook looks brighter, with growth likely to be somewhat above the trend of the past five years," New York Fed President William Dudley; • "Many of the gains that we recently predicted in the realtor.com® 2015 Housing Forecast are built on housing growth established in 2014,” Jonathan Smoke, realtor.com®’s chief economist; • "The housing market is likely to continue its gradual climb upward next year after a sub-par 2014. We anticipate a fairly strong increase in housing starts in response to stronger employment and some improvement in related household incomes," Fannie Mae Chief Economist Doug Duncan. Before we jump on the bandwagon, we must remember that no one can predict the future. As a matter of fact, we had similarly robust predictions about growth in 2014 at the end of 2013. The severe winter of 2013-2014 put a wrench in those predictions. Usually, predictions are based upon what is happening right now. The fact that the U.S. economy grew by 5.0% in the third quarter gives us optimism for 2015. So did the pace of job creation in November. Thus, December's job's numbers became important with regard to momentum going into the year and the numbers did not disappoint. The 252,000 jobs capped a year in which we added very close to three million jobs, which is the most in 15 years. Thus, not just optimism, but unbridled optimism. Keith Stewart 773-529-7000

January 6, 2015 Real Estate Report - Looking Back

Next week we will spend some time sharing predictions for 2015. But first we want to take a look back and see what happened in 2014. We started the year with a severe winter and a slowdown within the economic sector. We ended the year on an upswing best exemplified by the recently revised estimate for economic growth in the third quarter. The five percent growth rate was the strongest in over a decade. Though we are not expecting that the number for the last quarter of the year will come in at that level, there is also no evidence of a sharp slowdown in the rate of growth for the last quarter of the year. Employment growth picked up nicely in 2014. Well over two million jobs were created last year and the unemployment rate dropped almost one percent to below six percent with December's numbers still to be released. Inflation stayed tame this year and wage growth did not pick up significantly -- thus all was not a bed of roses with regard to the employment sector. On the other hand, the low inflation rate enabled mortgage rates to stay low throughout 2014 and oil prices dropped significantly, especially in the second half of the year. Meanwhile, the growth in the real estate market slowed somewhat in 2014. The pace of real estate sales leveled off and price gains were more moderate that the previous two years. As we have emphasized, the adjustments in the real estate sector are mainly related to the drop in distressed sales, which is actually a sign of normalization. Finally, the stock market was volatile but marched upward for most of the year as the bull market continued. This year's gains of over ten percent for the S&P Index has contributed to a gain of well over seventy percent during the past five years -- completing the stock recovery from the financial crisis lows of March of 2009. To illustrate, the Dow closed at a low of 6,547 in March of 2009 and finished 2014 close to 18,000, which now represents the fourth longest bull market in history Keith Stewart 773-529-7000

December 2, 2014 Real Estate Report - Polar Vortexes and Predictions

We have had some pretty optimistic projections recently from economists. For example, the following is from the Wall Street Journal's monthly survey of economists ...Faster job growth and stronger consumer confidence are already putting the U.S. expansion on a steady trajectory heading into 2015 and falling energy prices are offering another boost... While we share this enthusiasm, we also must remember that absolutely the same predictions were made at the end of last year. What happened? It was the weather. By the time America dug out from all the snow, it seemed the economy was playing "catch-up" all year. Well, the weather this November reminded us how important Mother Nature can be. Just ask Buffalo, the recipient of five to eight feet (that is feet, not inches) in a week. Of course, we are hoping that winter is over in December and it is not just starting! On the other hand, the weaker start to the economy was not just about the weather. The real estate recovery also took a pause in 2014. The early bad weather hurt, but in reality slower real estate sales were not just about a weaker market. The real estate statistics were pumped up previously by investors buying foreclosures -- many times in bulk. As foreclosures have decreased, so did these sales. Meanwhile, real estate sales have been increasing steadily during the second half of the year despite the loss of this segment of the business. In essence, the market is normalizing and we fully expect that the first time homebuyer will again replace the investor as the most important segment of the real estate market. It will take some time, but the fundamentals are in place. Meanwhile, this week we get another important reading on the employment sector. This will tell us if we will continue to have momentum heading into the new year and whether the Polar Vortex is providing another temporary respite from the recovery. Keith Stewart 773-529-7000

November 25, 2014 Real Estate Report - Happy Thanksgiving

It is hard to believe that another year is just about to pass, but the end of the year holidays are already here. It has been an interesting year. We began with one of the harshest winters ever to hit the United States and it seems as if we are ending the year with the same weather pattern, as the "polar vortex" hit much of the nation in the middle of November. It is interesting that the cold weather hit the same week that there was an announcement of a climate deal between the U.S. and China. How can there be global warming when the weather is so extraordinarily cold? Well, we can't get into the scientific arguments regarding the debate, but we will note that one of the effects of global warming is supposed to be more extreme weather, including precipitation. And these extremes did affect our economy this year. So, we will not be thankful for the colder weather and extreme storms, but we will be thankful that the economy has moved forward in spite of these obstacles. As a matter of fact, the last employment report was the best evidence that we have had that the economy is getting better. Why do we believe that? Well, the numbers were assessed as disappointing. We think that we have come a long way in order for a month in which the unemployment rate went down and we added over 200,000 jobs to be labeled disappointing. Just five years ago the economy was losing 200,000 or more jobs per month and the economy has not averaged 200,000 jobs growth per month since before the recession. Sure, there are disappointing statistics associated with the report. There is still a low labor force participation rate and stagnant wage growth, which means that many of the jobs being created are lower paying. However, the solution to both of these problems is the creation of more jobs. When there is a shortage of labor, then wages will increase. And if 200,000 jobs added per month is our "low-point" for the next year, there will be plenty of jobs created which will help these numbers. And continued low interest rates and falling oil prices are two additional things to be thankful for with regard to the economy. Yes, things are not perfect, but when you compare where we are today to five years ago, we are in a much better position to move forward with regard to a healthy economy. If it doesn't snow all winter! Keith Stewart 773-529-7000

November 11, 2014 Real Estate Report - Veterans Day

The election is over. The October employment report has been released. But these important events should not obscure the real importance of this week. Today is Veterans Day, the day we give homage to those who have served our country by defending our freedom throughout our history. We only need to look at what is happening in the Middle East to be reminded as to how important those who have served are to each and every one of us. Many don't realize how extensive the population of veterans is in this country. There are well over 20 million veterans and active military, comprising approximately 10% of the adult population of the United States. For those in business, this makes veterans a very important demographic. For example, did you know that over 15% of the new home sales in the United States are being financed through the Department of Veterans Affairs VA Loan Program? Veterans also own around 10% of all U.S. businesses and have an income which is approximately $10,000 higher than the average American. So, we should not only thank veterans for serving, but also as veterans come back from overseas, helping them assimilate into society is not only the right thing to do, it makes great business sense. Of course, we could not completely ignore the events of last week. As for the election, the results are important because we will no longer have a "divided" Congress; however, this does not mean that all gridlock will be removed. The employment report was also newsworthy, as this report followed our strongest month of job creation in quite some time. The numbers released Friday were slightly below forecast, but were still strong and included an upward revision of the job gains for the previous month. Plus, the unemployment rate moved down to 5.8% while the labor force participation rate increased slightly as well. All in all, a report that shows the jobs recovery continues to be on track. Keith Stewart 773-529-7000