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The Fed Speaks, But...
The Federal Reserve Board has spoken. The question is--what did they mean? Chairwoman Yellen indicated that the Fed definitely will be raising rates this year because they are afraid if they don't stay ahead of the curve, the economy will overheat. Yet, they are still concerned about the present economic slowdown. Well the statement does not sound very definitive to us.
What we believe the Fed is indicating is that they are not likely to raise rates in June, but are more likely to raise rates in September. But the September move will come only if the economic recovery hastens from here. This is actually what the markets have been predicting all along. At this point, we know the Fed won't move if the economy does not heat up, and much of the speculation is centered upon what the Fed might do after they fire the first salvo.
Meanwhile, we approach the release of important data which will tell us if indeed the economy is starting to heat up. There is no more important indicator than the monthly jobs report. Yes, we had a slowdown in hiring during the winter, but weekly first time claims for unemployment continue to stay very low which makes the economists think that a pick-up in hiring is just a matter of time. This week we will find out if this prediction will hold true.
After shacking up with family or friends for the past few years, millennials finally seem to be striking out on their own. The number of households grew by 1.48 million in the first quarter from a year earlier, following a 1.66 million increase in the final three months of 2014, according to data released recently by the Census Bureau. While the numbers can be volatile, it marks the fastest back-to-back gains in household formation since the second half of 2005. The census data doesn't break out age groups, so they don't specify who is forming these new households. Separate reports show that the previous weakness in household formation was driven by millennials—young adults born after 1980—so that group is most likely driving the improvement, says Maury Harris, economist at UBS Group in New York. The census data shows that the households being formed these days are rentals. Renter-occupied homes climbed by 1.87 million in the first quarter from a year ago, while owner-occupied units fell by 386,000. "This is positive for the economy," Harris says. "It would be better if they were buying, instead of renting, but it still helps if they're renting, instead of living at home." That's because the new tenants have to fill their apartments with stuff—coffee makers, televisions, and bed frames from Ikea. While they'll probably be buying less than if they were new homeowners, consumer spending should still get a nice boost, Harris says. More people seeking apartments also puts upward pressure on rents. As that happens, it will make buying a home more compelling to renters with sufficient credit. "There's an effect on homeownership and home sales down the road," Harris says. "It's a plus for the economy." Source: Bloomberg
About 1.5 million new housing units are needed each year to accommodate the rising population, writes Lawrence Yun, the chief economist of the National Association of Realtors® in the Economists’ Outlook blog. Yet, housing starts have averaged about 766,000 per year for the past seven years. “These multiple years of undersupply compared to what is needed is the reason why much of the country is experiencing a housing shortage with few inventory of homes for sale and falling apartment vacancy rates,” Yun notes. “Consequently, rents and home prices are rising by at least twice as fast as wage growth.” Yun says that builders need to ramp up construction soon or the housing shortage will worsen. “Housing affordability will take a hit as a result,” he says. The U.S. has about 4 million births each year and about 2 million deaths each year – which means an annual population gain of about 2 million. Also, immigration is making up another half million to one million each year, which brings the U.S. population up by about 3 million each year. Source: NAR
Just because there isn't a "For Sale" sign in a yard, doesn't mean the homeowner isn't taking offers. You just have to know the right person. Despite strong demand in many markets across the country, some homeowners are skipping the process of officially listing their home on the multiple listing services, leaving agents with the task of finding a buyer without publicly advertising it. And real estate professionals say these "secret" listings -- commonly known as "pocket listings" -- are becoming more popular. Kofi Nartey, a real estate broker at The Agency in Los Angeles, has recently seen an uptick in off-market lists. He says they currently make up around 10% to 15% of his firm's sales. But in a seller's market with bidding wars driving offers well above the asking price in some areas, why would a homeowner sell their home in secret? The reasons vary: some want privacy, others are testing the waters and some think the exclusivity can draw a higher sale price. "Many times I've had pocket listings where people will say, 'If I get this number I will sell, otherwise I have no desire,'" said Jade Mills, a real estate agent with Coldwell Banker Residential Brokerage in Beverly Hills, who recently sold a $38 million home off market. These secret listings make up about 10% of her sales, an increase from previous years. Source: CNN/Money
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