February 4, 2014 Real Estate Report - Just a Reminder

We have just started a new year and that means just about every economist has made their predictions for the year. One consensus of predictions for 2014 has been for higher interest rates. It makes sense--as the economy recovers interest rates will continue rising from record lows. Keep in mind that even as rates rise they are still at bargain lows. However, when one looks at rates for the first month of the year, they are trending moderately lower. There are many reasons one can give for these lower rates, starting with the weak December jobs report released in early January. Today we will not assess the factors causing rates to ease. Today we will make a few points about the significance of these lower rates. For one, it is just a reminder that no one can predict the future. As a matter of fact, when everyone seems to predict the same thing, often the opposite happens. Secondly, one month of lower rates does not mean that rates will be lower all year and the original prediction is moot. What we have here is an opportunity for those who were thinking about purchasing or refinancing their homes. Rates do not go up in a straight line. There are always dips and these dips provide opportunities. Again, we can't predict if the trend will continue. Which leaves us to one last question -- What would make rates start heading back up? Well, a good starting point would be the January jobs report which will be released on Friday. If the report reinforces the news from December, rates could stabilize at this level or go lower. Or if the report is strong, they could turn around in a blink of an eye. Typically the markets start speculating before the numbers are released so this week we could see volatility. Last week the Federal Reserve Board's Open Market Committee met and its decision to progress with its tapering of asset purchases seemed to be consistent with further optimism regarding the economy. Does that give us a hint? Unlike all these economists, we are not going to predict the future. Keith Stewart 773-529-7000

January 28, 2014 Real Estate Report - Will Congress Play Ball?

For several years we have been recovering from a financial disaster. The bad news is that the recovery has been so weak that many have felt we were not recovering. The good news is that the recovery has continued slowly but surely. During the way we have had several speed bumps thrown in our way. Some of these were not avoidable -- such as tsunamis and super storms. Others were man-made such as the threat of a government shutdown or a fiscal cliff. Today, many are more optimistic about what is on the horizon. The most important sector of the economy -- real estate -- is recovering. The fact that interest rates have risen over the past year is not a symptom of weakness, but a symptom of a stronger recovery and many analysts are optimistic that the soon-to-be-released advanced reading of the economy for the last quarter will continue this evidence. Despite the optimism, there is still the possibility of man-made roadblocks. For example, early next month Congress must vote on the extension of the debt ceiling. The good news is that before the end of last year, we actually had a bi-partisan agreement to keep the government open. This gives us optimism that Congress might again resolve a potentially sticky issue. We do know historically that this Congress will act at the last second (or afterwards) and there will be a lot of saber rattling. In the past when deadlines approached, the media coverage affected consumer confidence. At this point, it may be that confidence will not be affected as much by these negotiations because we have become anaesthetized by it all. We are just used to it at this point. Early next month we have a jobs report and a Congressional issue. Let's hope neither puts another speed bump in the way of our continuing recovery. On the other hand, we don't want the Federal Reserve Board thinking that things are going too well when they meet this week so that they become inclined to make an announcement that will reverse the recent trend towards lower rates. Keith Stewart 773-529-7000

January 21, 2014 Real Estate Report - Jobs--The Key Ingredient

Last week we reported on a disappointing jobs report. We also indicated that we should not jump to a conclusion as to the importance of this one report. One report can be very misleading and is subject to significant revisions in the next two reports. In this case we had inclement weather which could have temporarily affected the numbers as well -- especially within the construction industry. In addition, if you look at the trends in first time unemployment claims, you can see a reason to be optimistic about better numbers ahead. But the next question we must ask is--why is the employment report so important? Every month the employment release is under more scrutiny than any other report. The answer to this question is much easier than predicting the future of jobs growth. A healthy economy produces more jobs. More than that, the jobs created by a healthily economy causes more jobs to be created. This is what we call a "virtuous cycle." One good thing leads to another which comes back and supports the first good thing. During the recession and during our painfully slow recovery, we climbed out of a vicious cycle, but never quite reached a virtuous cycle. Adding over 200,000 jobs per month puts us in reach of the virtuous cycle. We were starting to see these numbers late last year until the last report. Now we must ask if the December report was just an aberration of numbers, or was it the start of a new trend. Thus far the economic reports are certainly strong enough to support decent job growth. All we can do is wait a few weeks for more numbers. But for those who are looking to purchase big ticket items such as homes and cars--the reaction of the markets to the jobs report gave us moderately lower rates and that is a good thing. However, it is likely to be temporary at best if the employment picture gets stronger with the next report or first time claims of unemployment continue to trend downward. Keith Stewart 773-529-7000

January 14, 2014 Real Estate Report - The Employment Report Disappoints

Just when we were starting to get used to strong jobs data we were reminded of an important adage -- never try to predict the future. While the analysts were predicting December job growth would be around 200,000, the number came in short of 100,000. This number disappointed the markets. In a strange twist, the unemployment rate fell from 7.0% to 6.7% when no decrease was expected, but this was not seen as a sign of strength as many left the workforce in December. In all, the economy added just over two million jobs in 2013 which is pretty close to what occurred in 2012. This translates into approximately 170,000 jobs per month. All the while the unemployment rate has been dropping and we seriously doubt that such a precipitous drop in 2013 -- over 1.0% -- is due entirely to a smaller work force. We are now getting close to where we have replaced the over eight million jobs lost during the recession, but we are not quite there yet. Three important points about the jobs report. First, these numbers are subject to future revisions. We would not be surprised to see the numbers revised upwards one month from now, especially considering the fact that the private payroll report showed over 200,000 jobs added for December. For example, in the same report November numbers were revised upward by 38,000. Secondly, weather issues in December could have depressed the numbers temporarily. Finally, rates fell initially in reaction to the report and the stock market did not show a negative reaction. Why? These numbers are not strong enough to prompt the Federal Reserve Board to abandon their stimulus program more quickly than planned. If revisions don't change the numbers, the halt to rate increases represents good news for consumers and business. Keith Stewart 773-529-7000

January 7, 2014 Real Estate Report - The First Big Event

The Holidays are just behind us and already we are coming up to the first big economic event of 2014. On Friday the employment report for December will be released. In addition, it is "jobs" week with releases such as Wednesday's ADP payroll report and Thursday's first time claims for unemployment. The stock markets ended the year on a roll and much of this roll was due to economic optimism which arose from strong jobs reports during October and November. This month we not only will be watching the December release, but also potential adjustments to the previous two months' numbers. The unemployment rate fell from just under 8.0% to start 2013 to 7.0% by November. The increased number of jobs created bodes well for overall economic performance and also will help dictate how quickly the Federal Reserve Board will wind down their stimulus programs. It may well be that market watchers have come to expect stronger jobs reports and any numbers released well short of 200,000 jobs created may cause some consternation in the markets. While stocks may react negatively to a surprise on the downside, this would likely help dampen the rise in long-term interest rates we have been experiencing. In addition, because the jobs report is being released a bit late this month because of the Holidays and the calendar, the February report will come rather quickly. Keith Stewart 773-529-7000

December 31, 2013 Real Estate Report - New Year -- New Hope

It has been five years since the depth of the recession was upon us. For five years we have been recovering. The recovery has been painful and slow with many starts and stops. Yet, as we approach 2014 there seems to be more optimism regarding the status of the economy recovery and our future. Some of this optimism is rooted in facts and some of this optimism comes from sentiment. First the facts. For the first time in five years, the real estate market participated and is contributing in the recovery. When homeowners feel wealthier because of rising home values, the entire economy benefits. It is no coincidence that the economy grew at stronger pace in each of the past four quarters--including a robust 4.1% growth rate in the third quarter. Employment growth has picked up and this job growth is picking up within a variety of sectors--including state and local governments -- which is a sector that was laying off tens of thousands just a few years ago. About those feelings. For a long time we have been saying that this was a crisis of confidence. Confidence is a feeling. In general, we can see that consumer confidence is rising as the year draws to a close. There is even hope that Congress is starting to show stronger levels of bi-partisanship -- which is a good thing with the debt limit issue about to hit in the first quarter of 2014. Confidence allows people to make important decisions such as getting married and starting a family. Here is to a great New Year for all--and hoping the growth in good feelings continue for all of 2014! Keith Stewart 773-529-7000 www.ChicagosMortgageChoice.com

December 24, 2013 Real Estate Report - The Fed Speaks -- Holiday Cheer?

Well after months and months of speculation, the Federal Reserve Board finally announced the start of their "tapering" program in which they will reduce the amount of their purchases of government and mortgage-back securities by ten billion dollars per month. Starting in January, the Fed will purchase $75 billion dollars monthly instead of $85 billion dollars. This program was instituted during the financial crisis both to keep long-term rates lower and provide some stability in a mortgage market which was devastated by the crisis. By lowering the amount of purchases, the Fed is officially proclaiming that America is well on the road to recovery. This does not mean that the Fed is about to raise interest rates. What it means is that the Fed will be exerting less influence over long-term rates which are of utmost importance to consumers because fixed-rate home loans are influenced significantly by the direction of long-term interest rates. The Fed has been going out of its way to say this does not mean that they are ready to raise short-term rates. The Fed has emphasized its commitment to keep short-term interest rates "exceptionally low" until either the unemployment rate falls to around 6.5% or the inflation rate exceeds 2.5% a year. Why is this good news for the Holiday? Well, the stock markets rallied decisively on the news. The economy is recovering and this is a good thing. Long-term rates rise when the economy is stronger. This is especially the case when rates are bouncing back from the lowest point in history. But rates are still very, very historically low. And this is good news for homeowners because a stronger economy will translate into more buyers and this will cause the positive cycle to continue. All in a low rate environment. So, we have something to celebrate. Keith Stewart 773-529-7000