Real Estate News

Significant News for the Fed

A View from the Beach
ECONOMIC COMMENTARY
September 19, 2017 –

 

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.

 WEEKLY INTEREST RATE OVERVIEW

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Real Estate News

America is Tested Again and Again

A View from the Beach
ECONOMIC COMMENTARY
 September 12, 2017 – 

 

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.

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More Jobs News

A View from the Beach
ECONOMIC COMMENTARY
September 5, 2017 –  

Last month we spoke about the data that will be coming out before the Federal Reserve Board meets towards the end of September. These economic reports included jobs, inflation, the quarterly reading on economic growth and more. The August job numbers released just before the Labor Day weekend was expected to be one of the major determinants contributing to the decision by the Fed — along with unexpected events that might come up. Certainly, the massive stormed named as Harvey has been a major example of such an unexpected event.

Until now, most analysts were betting that the September Fed announcement would include an October start to the Fed’s previously announced program of paring down mortgage and government bonds. While the markets are dreading such a plan, because it could potentially raise long-term interest rates — the paring down is expected to be gradual. In addition, the Fed is not expected to raise short-term rates in September, but leave open the possibility of such a move before the end of the year.

Did the numbers released strengthen these assessments, or could there be another course for the Fed? The increase in jobs of 156,000 was seen as disappointing, especially when coupled with the downward revision of the numbers for the previous two months. The unemployment rate moved up slightly to 4.4% and wage inflation continued to be tame. The bottom line? Along with the devastating effects of the storm, this further decreases chances for a rate hike this month, but may not deter the Fed from starting to pare down their assets.

 WEEKLY INTEREST RATE OVERVIEW

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Fall Forward

A View from the Beach
ECONOMIC COMMENTARY
August 29, 2017

 

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!

 WEEKLY INTEREST RATE OVERVIEW

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Saber Rattling

A View from the Beach
ECONOMIC COMMENTARY
August 22, 2017 –  

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.

 WEEKLY INTEREST RATE OVERVIEW

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The Dog Days of Summer

A View from the Beach
ECONOMIC COMMENTARY
August 15, 2017 – 

 

August 15 is supposed to be right in the middle of the dog days of August. But we learned recently that the phrase “dog days of August” relates to the period that Sirius, a star known as the “Dog Star,” rises at the same time as the sun. This period is typically in late July until early August. Thus, the phrase is also known more generally as the “dog days of summer.”

What does the dog days of summer mean for the markets? Not only are families taking vacations, so are institutions. The Federal Reserve Board’s Open Market Committee does not meet in August. Congress is in recess and the President is on a long working vacation. Even equity traders and market analysts are on vacation, which typically results in lower trading volume for stocks, bonds and more. Thus, everyone should be taking a long-deserved break during August.

Does that mean that the month will be completely quiet? We can’t really predict a complete time of rest for the markets. Traditionally, during times of lower trading volume, any type of major event could produce more volatility than usual. And, though it seems that everyone in D.C. is on vacation, the world does not go to sleep. Nor does the weather. For our part, we do hope that everyone has a restful remainder of the summer and that the quiet enables those economic sleeping dog days to lie about as well.

A personal note.  I was lucky enough to be the low qualifier and therefore the #1 seed in our Club Championship at Cripple Creek Golf & Country Club to be played this coming weekend.  I was very fortunate to shoot a one over par 73 which included a chip-in eagle on the 18th hole.

 WEEKLY INTEREST RATE OVERVIEW

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The Economic Expansion Continues

A View from the Beach
ECONOMIC COMMENTARY
August 8, 2017 –

 

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.

 WEEKLY INTEREST RATE OVERVIEW

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