For the past three quarters, the economy has grown at an annual rate of just under 3.5% based upon the preliminary numbers released in late January for the 4th quarter. This growth rate is even more impressive when you consider the fact that we endured a government shutdown for part of the last quarter of 2013. It is estimated that this shutdown knocked approximately 1% off the growth rate for the 4th quarter. A 3.5% growth rate, while not smoking hot, is strong enough to bring down unemployment while not igniting fears of inflation. A pretty good balance.
And this balanced growth is a good indication as to why the stock markets rallied strongly in 2013 while long-term interest rates rose. Now we ask whether this growth rate is sustainable for 2014. We had several weak reports released in January, including the December jobs report and a slowing housing sector. Some have hypothesized that the severe winter weather in December and even worse weather in January is the culprit. If this is the case, the numbers should bounce back--including the stock market and rates, both of which fell in January.
Keep in mind that storms actually can boost some sectors of the economy such as the use of energy. Our heating bills are telling us that. Last week's release of January's jobs report was another mixed bag with the unemployment rate unexpectedly moving down slightly to 6.6% but the total jobs created below forecast at 113,000. It is interesting to see both the number for January and also the revision of the previous months' numbers as there was very little adjustment to the disappointing December release but upwards adjustments in previous months. Weather related slowdown? With regard to jobs creation we certainly hope this is the case. We think everyone is hoping for a warmer February, though it has not started out that way.
More than three-quarters
of Americans who fall within Generations X and Y believe they have become
increasingly knowledgeable about home ownership due to the greater media
coverage on the real estate market the past six years, according to a Better
Homes and Gardens Real Estate survey of about 1,000 18-35 year olds. These two
generations say that before buying they’d do their homework first, researching
interest rates, home prices in a desired neighborhood, and the ability to
secure a loan. Despite the past housing crisis, these generations say they are
not deterred from home buying, and 75% say that home ownership is a key
indicator of success. Generations X and Y, which boast 103 million of the
population, are viewed as major drivers of the economy for the next 30 years. Among
some of the survey’s findings about Generation X and Y’s perceptions on home
ownership is:
·
71% of Gen X and Gen Y surveyed say that home ownership is not
something they deserve but rater something you must earn, and they say they’re
willing to sacrifice in order to be able to buy a home one day. Sixty-two
percent say they would save by eating out less, 40 percent are willing to take
a second job, and 23 percent would move back home with their parents.
·
75% say owning a nice home is an indicator of success over taking
fancy vacations, owning an expensive car, or owning designer clothing. Source:
Better Homes and Gardens Real Estate
Professionally
photographed homes tend to sell for more money and sell faster than homes
listed with point-and-shoot cameras, according to a new study by the real
estate brokerage Redfin. The study found that homes priced between
$200,000 and $1 million sold for an average of $3,400 to $11,200 more than
their list prices when professionally photographed than homes with amateur
photos. For homes priced between $400,000 and $499,999, the study found that
homes professionally photographed sold for $11,200 more. In an analysis of
22 markets, the Redfin study evaluated the sales success of homes shot
professionally with a digital single-lens reflex camera versus homes shot with
amateur, point-and-shoot cameras. The study evaluated homes priced between
$200,000 and $1 million. The study also found that homes that were
professionally photographed also tended to sell faster. For instance, homes in
the $400,000 range that were professionally photographed sold 21 days faster
than those photographed with point-and-shoot cameras. Source: Redfin
Could this be the year to check
out hybrid mortgages, which haven't been popular lately? Maybe. You can count
on interest rates going higher because the Federal Reserve intends to continue
reducing its monthly purchases of mortgage bonds and Treasury securities, which
will have the side effect of raising rates and the national economy finally
appears to be picking up steam, based on the latest quarterly data. Higher
growth rates in turn will increase demand for available credit and probably
nudge rates higher. So what does this mean for you if you're thinking about
buying a house or refinancing and you want to nail down the most favorable
interest rate and terms? Should you shop primarily for a traditional home loan
that guarantees you a specific rate for 15 to 30 years? Or should you check out
what's also on the shelf in the way of hybrids — loans that provide a
guaranteed fixed rate for a pre-defined period of time, say five, seven or 10
years — then convert to a rate that can change annually? The case for sticking
with a traditional fixed-rate loan is straightforward. Though 30-year rates are
more than a percentage point higher this month than they were a year earlier,
they are still not far off multi-decade lows. On the other hand, loans that
provide a guaranteed fixed rate for a pre-defined period of time, then convert
to a variable rate, are usually less expensive than traditional 30-year fixed
loans. Source: Ken Harney, The Nation's Housing Want to check out
current rates on hybrid adjustables? Just contact me and I will give you
up-to-date quotes.
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