Chicago's Mortgage Choice - February 24, 2015 Real Estate Trends - The Surging Dollar

In the past few months, we have focused upon many factors affecting the economy. These have included low oil prices and interest rates. The same international economic and political factors which have pushed rates and energy prices lower and contributed to volatility in the stock market, also have caused the U.S. Dollar to surge to levels not seen for years. There are many positives associated with a stronger dollar. For one, our dollar is strong because our economy right now is stronger than many other countries, especially Europe. In addition, a stronger dollar makes imports and travel cheaper, which lowers the threat of inflation and helps keep our interests rates low. However, there is a negative side of a strong dollar. Because our exports become more expensive to foreign nations, it can slow our economy and cost us jobs. Like everything in life, each economic factor creates balances. If our economy is stronger than others, the stronger dollar can bring it down a notch. Here is the good news. With low oil prices and interest rates, the consumer has a chance to be an economic star in 2015. The creation of more jobs and low rates could very well turn into great news for the real estate market in 2015 and thus offset the negative effects of a stronger dollar. Meanwhile, it is a good time to book a hotel room in Europe and many other places. Keith Stewart 773-529-7000

Chicago's Mortgage Choice - February 17, 2015 Real Estate Report - Have We Hit Bottom?

Usually, when we hear that someone or something has "hit bottom" -- that is a good thing, because the only direction that person or thing can go from there is up. On the other hand, if we are talking about oil prices and interest rates, hitting a bottom might not be considered a good thing. For example, if you were looking for gas prices to hit $2.50 per gallon, they are not going near that price if we have indeed already hit bottom. Indeed, there is some evidence that oil prices bottomed around $45 per barrel. We are not surprised by the fact that oil prices rebounded to the $50 per barrel range because they had fallen so far and so fast. Often markets overshoot the fundamentals and come back to be in balance. Are oil prices going back to $100 per barrel? We have no idea because we can't predict the future. However, most likely the price will settle somewhere in between $45 and $100 without some major intervening economic or political variable. Interest rates too have been falling for the past few months. Not as precipitously as oil, but one must remember that rates were already very low. The fact that rates went back to the record low levels hit two years ago, was quite extraordinary and certainly not predicted. Like oil, we are not surprised that rates have rebounded somewhat. If a few weeks ago was the bottom, there will likely be a rush of those who waited too long. When homeowners and buyers realize that, we expect there to be lines forming to refinance or purchase a home. The question is -- is there still time to get in front of the line? Keith Stewart 773-529-7000

February 10, 2015 Real Estate Trends - The Employment Report is Released

For the first part of the year, the focus has been international news, rather than domestic economic reports. Not that we have not had our share of news, including the first meeting of the year for the Federal Reserve Board's Federal Open Market Committee (FOMC). The statement from the committee indicated some of the same emphasis on international news. This news has included increased economic stimulus in Europe where the economies continue to struggle. The stronger dollar and low price of oil are also affecting overseas economies -- as well as our own economy. It is unlikely that our interest rates would not be so low without the world-wide economies continuing to languish. The question is, will our economy continue to thrive through all of this world-wide economic and political turmoil? Thus, January's reading of the jobs situation released on Friday was all-important in this regard. What did the data show? It showed that our economy is continuing to strengthen as the world slows down. More jobs were created than expected, the previous months were revised even higher than originally reported and hourly earnings showed a healthy jump. Even the higher unemployment rate was seen as a positive as this was due to more job seekers entering the market. Any increase in the labor participation rate is viewed as a sign of an increasingly confident consumer. Keith Stewart 773-529-7000

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