Typical JittersSeems like it happens often when a meeting of the Federal Reserve Board is coming. The markets analyze all the data, and declare that the rate hike is not likely. Then the closer we get to the meeting, the more the markets get jittery by thinking that a rate hike may take place anyway. This seems to be what happened to the stock and bond markets starting just under two weeks before the meeting, with stocks taking a dive while interest rates increased.
Why do we say that this is just market jitters, and not for some other fundamental reason? Because on a typical day in which stocks go down, interest rates will also decrease. For example, if there were a major economic or political shock across the globe causing stocks to tumble, investors would be buying bonds as a safe haven. Thus, we believe that we have typical “pre-Fed meeting” market nervousness. The good news about this nervousness? Often the markets recover even before the meeting takes place, though sometimes the recovery takes place afterwards.
What if the Fed does raise rates? Then it is possible that the markets may rebound a bit because they have already taken this action into account. Keep in mind two things: First, the markets continue to believe that the rate hike is less probable — even though there is some concern because the Fed is not likely to act at the next meeting which is right before the election. Second, even when the Fed raised rates in December, the markets recovered quite nicely, even after a rough start to the year. Thus, just because the market’s jitters are based upon reality, this does not necessarily preclude a good finish to the year.
The “starter home” trend may be fading in real estate. Prior to the housing bubble, first-time buyers with average incomes would shop for a more affordable, smaller house with the idea of moving on to a larger home in a few years. Today’s first-time buyers want a home that meets their needs now and in the future. Seventy-five percent of first-time buyers say they prefer to skip the starter home and find a house that meets their long-term needs, according to a recent survey. Thirty-five percent say they even intend to stay in that home until they retire. First-time buyers nowadays tend to be higher earners, due to rising home prices and tighter housing inventories. As such, these higher earners desire fancier homes. In 2013, first-time buyers purchased homes with an average of 1,845 square feet. Meanwhile, the average home in the U.S. is just 1,819 square feet, according to BuildZoom’s analysis of data from the Census Bureau. “So those home buyers who probably would have been looking for the lowest-end homes 10 years ago during the housing boom are today just not able to buy. And those that are able to buy are looking further upmarket,” says Issi Romem, chief economist for BuildZoom. Many first-time buyers aren’t planning to upgrade and move on in five years, like they once did. They plan to stay put. “When they do purchase, they’re planning on living there longer than buyers that we’ve seen in the past,” says Jessica Lautz, NAR’s managing director of survey research. “They’re expecting to live there 10 years.” Source: USA TodayColumnist Jeff Reeves with MarketWatch says right now is the best time ever to invest in real estate. He says bubble fears amount to “a lot of hogwash.” “Whether it’s stricter lending standards, a shift in attitudes among borrowers or simply the nation getting wiser about the risks of real estate, we’re hardly seeing irresponsible buying in 2016,” writes Reeves, who is also the editor of InvestorPlace.com. “What we are seeing is a healthy housing market that continues to steadily and organically appreciate.” As such, he says it’s prime time for investors to jump in. Home prices are on the rise and median home prices are above pre-recession levels and even reaching new highs in some locales. Appreciation is growing about 5 percent each year. “Nobody should put all their savings into one or two properties. But, in a diversified portfolio, there is a very good argument for real estate investments in 2016,” writes Reeves. Source: MarketWatch
Young adults aged 18 to 34 are more likely to live with a parent than in any other arrangement for the first time since 1880, the Pew Research Center recently reported. But researchers have found a somewhat surprising segment of the millennial population more likely to be staying in their parent’s basement. Pew reports it’s mostly older, male millennials without a college degree who are contributing to the record numbers. While the youngest of today’s adults are still the most likely to live with their parents, the numbers show a growing number of older millennials are moving back in. For example, 25 percent of people ages 25 to 29 are living with a parent, up from 18 percent 10 years ago. What’s more, 13 percent of Americans ages 30 to 34 are living with their parents, up from 9 percent a decade ago. Richard Fry with the Pew Research Center says, “These trends could have larger implications for future economic growth and financial stability, as housing represents over 60 percent of assets held by the middle class and roughly 15 percent of the gross domestic product. Since the share of 25- to 34-year-olds living with a parent has been steadily rising since reaching its lowest point 45 years ago, it may be years until we experience the full significance of these new living arrangements. With its potential impact on the economy, though, it’s a trend we may not be able to ignore.”Source: The Washington Post