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FOMC Minutes Reveal Fed Policymakers U-Turn

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FOMC Minutes Reveal Fed Policymakers U-TurnMembers of the Federal Reserve’s Federal Open Market Committee voted to hold the target range of the federal funds rate to its current range of 2.25 to 2.50 percent. The minutes of the most recent Committee meeting cited softening domestic and global economic conditions as reason for not raising the target federal funds range.

While labor markets remained strong, the minutes noted that household spending and business investment slowed in the first quarter of 2019. FOMC members expected Gross Domestic Product growth to slow as compared to its 2018 pace.

While current inflation and the national unemployment rate fell in line with the Fed’s dual mandate of seeking maximum employment and price stabilization, inflation fell due to falling fuel prices. The meeting minutes said that the Committee would be patient as it determined which, if any, action would be appropriate regarding the federal funds rate.

Strong Labor Sector Indicators Offset Lower GDP

Labor sector indicators remained strong with a national unemployment rate of 3.80 percent; labor force participation rose and the ratio of employment to population also rose. Strong employment and consumer sentiment readings suggested that more households may transition from renting to buying homes. Home sales recently fell due to affordability issues and rising mortgage rates.

Factors influencing FOMC monetary policy decisions include labor market conditions, inflation expectations and readings on domestic and international financial developments. The meeting minutes noted that near-term adjustments to monetary policy were dependent on changes to current economic outlook according to emerging data. The Committee consistently says that monetary policy positions can change according to developments in global and domestic economic data.

Fed Chair‘s Press Conference

Federal Reserve Chairman Jerome Powell said during his post-FOMC meeting press conference that the Committee’s “wait and see” stance on raising the target range of the federal funds rate was based on information received since growth expectations based on 2018’s economic growth rate of 3.10 percent. As of September 2018, the Fed forecasted economic growth of 2.50 percent in 2019, but subsequent information caused the Fed to downwardly revise its growth estimate.

Mr. Powell said that global economic slowing was expected in Europe and China; unresolved issues including Brexit and ongoing trade negotiations were given as reasons for slower global economic growth. While domestic and international economic forecasts indicated a modest slowdown in economic growth, Chairman Powell said that overall economic conditions remained favorable.

If you are in the market for a new home, be sure to consult with your trusted real estate professional to get the most up-to-date information about the market trends in your area.

Are Multi-Unit Properties the Right Move for You?

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Are Multi-Unit Properties the Right Move for YouReal estate isn’t a one-size-fits-all pursuit. Buying and renting multi-unit properties is one of the ways investors build residual income while increasing their property portfolios. However, multi-unit rentals come with some unique challenges. Are you ready to manage a multi-unit rental property?

Ask yourself these questions to help you decide which path best fits your resources, goals, and interests.

Do You Plan To Live On The Property?

Living in one of your rental units offers a myriad of benefits. First, you get to keep a close eye on building conditions and the actions of your renters. Next, you’ll be able to respond quickly to an emergency. Last, you won’t have to pay extra for your own living quarters. You won’t have this option with single-occupancy properties.

Will You Work With A Property Management Company?

If you are more of a hands-off investor, a property management company makes owning properties simple. Their staff will collect the rents, respond to requests for maintenance and repairs, and take care of all the paperwork that comes along with rental units.

All you need to do is collect your portion of the payments and keep up with your bank loans. You can still work with a property management company if you opt for single-family properties. However, it may not be the most cost-effective solution in that situation.

Are Market Conditions In Your Area Changing Quickly?

When rental prices go up, it can be difficult for investors to take advantage. Long-term occupants may balk at the idea of paying more for the same property. With multi-unit buildings, you can raise prices as tenants vacate. In this way, you can keep your current occupants happy without sacrificing potential profits.

Are You Looking For More Ways To Increase Your Income?

Multi-unit properties are a unique opportunity for enterprising investors. Rent out space under stairways or in common areas to vending machine companies. Your residents get convenient snacks and you earn a little extra cash each month. A coin-operated laundry room is another addition that adds value for your residents while increasing your own payouts.

Managing a multi-unit building means more paperwork, maintenance, and marketing. However, the potential profits might be worth it. Take some time to review your own goals and abilities before committing to a purchase.

Be sure to consult with your trusted real estate and mortgage professionals to find out more information about purchasing multi-unit rentals.

States With The Best Opportunities To Acquire Investment Property

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States With The Best Opportunities To Acquire Investment PropertyReal estate investors sometimes get stuck in a rut. They repeat the same type of investment that they did before. This is not necessarily a bad thing because a successful experience is worth repeating. However, it is also a good idea to occasionally take a look at the big picture as well, to see what else is out there for investment consideration.

Real estate markets go up and down. This can be a regional phenomenon. In some states, there are lots of properties that are “underwater.” This means the owners borrowed more on their property than it is currently worth.

In other states, there are properties that generate positive cash flow, while increasing in value. This is very desirable. It means that after paying all the expenses of owning the property, there is cash left over for the owner to receive and profits when selling the home.

Invest In Value

The investment strategy of buying low and then selling high is sage advice. To that, we would add the fine-tuning of buying value. Buying value means making investments that produce the greatest positive cash flows, while the investments appreciate in value.

State-By-State Comparisons

GoBankingRates did an analysis of the United States to see what states currently offer the best real estate deals for investors. They took a look at the three top markets in each state. They calculated the average for the home values and noted the increase in property value from 2017 to 2018.

There are 15 states that offer opportunities worth considering, which are:

Utah 

The three largest markets are Salt Lake, Provo, and Ogden. The average home price is $350,000 with a 12.6% year-over-year increase in value.

Idaho

The largest markets are Boise, Idaho Falls, and Coeur d’Alene. The average home price is $304,000 with a 12.6% year-over-year increase in value.

Montana

The largest markets are Billings, Missoula, and Great Falls. The average home price is $343,000 with an 11.1% year-over-year increase in value.

Maine

The largest markets are Augusta, Bangor, and Portland. The average home price is $231,000 with a 10.7% year-over-year increase in value.

Indiana

The largest markets are Indianapolis, Fort Wayne, and Evansville. The average home price is $179,000 with a 9.3% year-over-year increase in value.

Tennessee

The largest markets are Nashville, Memphis, and Knoxville. The average home price is $251,000 with a 9.1% year-over-year increase in value.

Georgia

The largest markets are Atlanta, Augusta, and Columbus. The average home price is $250,000 with an 8.8% year-over-year increase in value.

Michigan

The largest markets are Detroit, Grand Rapids, and Warren. The average home price is $205,000 with an 8.5% year-over-year increase in value.

Missouri

The largest markets are St. Louis, Springfield, and Kansas City. The average home price is $203,000 with an 8.1% year-over-year increase in value.

Mississippi

The largest markets are Jackson, Hattiesburg, and Gulfport. The average home price is $191,000 with a 7.4% year-over-year increase in value.

Ohio

The largest markets are Cincinnati, Columbus, and Cleveland. The average home price is $207,000 with a 7.2% year-over-year increase in value.

Nebraska

The largest markets are Omaha, Lincoln, and Bellevue. The average home price is $221,000 with a 7.0% year-over-year increase in value.

Alabama

The largest markets are Birmingham, Montgomery, and Huntsville. The average home price is $210,000 with a 7.0% year-over-year increase in value.

Kentucky

The largest markets are Louisville, Lexington, and Bowling Green. The average home price is $226,000 with a 6.0% year-over-year increase in value.

Arkansas

The largest markets are Little Rock, Fort Smith, and Fayetteville. The average home price is $195,000 with a 5.7% year-over-year increase in value.

Summary

There are interesting opportunities uncovered by this analysis. Utah and Idaho are very attractive for investing right now. Real estate investors considering any of these states can also compare population growth rates, unemployment rates, cost-of-living, and other livability factors when making an investment decision.

If you’re interested in looking at properties in another state, contact your trusted local real estate professional. They are the best resource to help you identify great properties and agents to work with across the country.

Case-Shiller Home Price Growth Slower in January

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Case-Shiller Home Price Growth Slower in JanuaryHome price indices issued by S&P Case-Shiller showed further slowing in home price growth in January. The national home price index showed 4.30 percent home price growth for the three months ended in January. Analysts expected home prices to grow 4.20 percent for the same period in cities surveyed by Case-Shiller. More cities reported declines in home prices than those that posted gains in home prices.

The top cities posting year-over-year home price gains in the 20-City Home Price Index were Las Vegas, Nevada with 10.50 percent growth; Phoenix, Arizona posted a year-over-year home price gain of 7.50 percent. Three cities tied for third place with Charlotte, North Carolina, Minneapolis, Minnesota and Tampa, Florida posting year-over-year home price growth rates of 5.10 percent.

Home Price Growth Stalls Throughout U.S.

Noteworthy in January’s readings were the West Coast’s loss of dominance in home price growth rates and the retreat of double-digit yearly growth rates for home prices. Las Vegas, Nevada posted the only double-digit price gain year-over-year, but it suffered steep declines in home values during the recession. The 20-City HPI for January showed month-to-month home price growth slowed in 14 cities, was unchanged in one city and five cities posted gains in home price growth rates.

David M. Blitzer, managing director and chair of the S&P Case-Shiller Index Committee, said that the home prices had not grown so slowly since April 2015. Rapidly rising home prices sidelined many buyers who could not afford to keep up with home prices that rose faster than inflation and wages. Analysts said that housing markets were leaning in favor of home buyers as home price growth slowed. Mr. Blitzer said that it “remains to be seen if recent low mortgage rates and smaller price gains can sustain improved home sales.”

Federal Reserve policymakers recently announced that the Fed would hold steady on its target federal funds rate range of 2.25 to 2.50 percent; this fueled a drop in mortgage rates. Analysts said that rates could continue to fall. Slower home price growth and lower mortgage rates are expected to encourage would-be home buyers back into the market.

If you are considering purchasing a new property, be sure to contact your trusted real estate professional to discuss the market conditions in your area.

NAHB: Housing Market Index Flat in March

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NAHB Housing Market Index Flat in MarchBuilder sentiment held steady in March as headwinds in housing markets affected homebuilder confidence, but National Association of Home Builders Chairman Greg Ugalde said that builders were looking forward to a “solid spring home-buying season.” Builder sentiment mirrored February’s index reading of 62; analysts expected an uptick to 63.

Any Housing Market Index reading over 50 indicates that more builders than fewer have a positive outlook on housing market conditions. The average reading for 2018 was 67, which indicated that builders were less confident current market conditions for new homes than in 2018.

HMI Component Readings Mixed in March

Three sub-readings used to calculate the monthly Housing Market Index reading showed builder confidence in current market conditions rose two points to 68; Builder confidence in market conditions over the next six months rose three points to 71 and homebuilder confidence in buyer traffic dipped four points to 44. Readings for buyer traffic seldom exceed the benchmark reading of 50.

The National Association of Home Builders said in a statement that housing markets are “stabilizing,” but did not say that housing markets were growing. Economists and housing market analysts rely on the Housing Market Index for clues about future housing production. Demand for new homes has been strong for years, but headwinds including tariffs on building materials and labor shortages continued to impact construction rates. More new homes on the market could ease pent-up demand for homes, but rapidly rising home prices are making home ownership less feasible for first-time and moderate-income home-buyers.

Imbalance Between New Homes Built and Consumer Needs

Analysts called out a problematic trend in meeting demands for new homes. Price points are frequently beyond affordable for most buyers, and new housing developments often trend toward larger homes with higher prices. Analysts said that from 2010 to 2017, the average size of new homes increased by 300 square feet while household size decreased over the same period. Lower mortgage rates benefit homebuyers concerned over affordable house payments, but strict mortgage qualification requirements limit the number of potential home buyers that can qualify for mortgage amounts needed to buy homes.

If you are in the market for a new home or interested in selling your current property, be sure to contact your trusted real estate professional.

Case-Shiller: December Home Price Growth Slowest in 4 Years

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Case-Shiller: December Home Price Growth Slowest in 4 YearsCase-Shiller Home Price Indices reported the slowest rate of U.S. home price growth since November 2014. According to the 20-City Home Price Index, Home prices grew by 4.20 percent year-over-year and were 0.20 percent higher in December as compared to November. The 20-City Home Price Index fell short of analysts’ expected gain of 4.80 percent year-over-year. Case-Shiller’s National Home Price Index reported home prices increased 4.70 percent in the fourth quarter of 2018.

While home price growth is sluggish, home prices continued to rise faster than wages. This creates obstacles to affordability for many would-be home buyers. Fears about rising mortgage rates and inflation, also concerned would-be home buyers seeking affordable homes.

20-City Home Price Index: Home Price Growth Rose In Only 5 Metro Areas

Las Vegas, Nevada led in home price growth for December with a year-over-year increase of 11.40 percent. Phoenix, Arizona home prices rose 8 percent year-over-year, and Atlanta, Georgia home prices increased by 5.90 percent. Home prices in west coast cities including  San Francisco, California and Seattle, Washington grew at a slower pace than in prior years, which could indicate that high-demand metro areas are approaching peak home prices.

December home price growth surpassed November readings in five cities tracked in the 20-City Index. Three cities reported no change in month-to-month home prices growth. David M. Blitzer, Chair of the S&P Dow Jones Index Committee, acknowledged that year-over-year home prices continued to fall despite the prior assertion that housing markets were not approaching “bubble” conditions seen in the Great Recession.  

Serious Headwinds Face Prospective Home Buyers

According to data compiled by the National Association of Realtors®, 27 percent of prospective home buyers surveyed at the end of 2017 believed that they would face fewer challenges to finding and buying a home in 2018. Prospective buyers surveyed in late 2018 who planned to buy within the next year decreased from 24 percent to 13 percent. Combined impacts of high home prices, potential increases in mortgage rates and strict mortgage requirements discouraged some would-be buyers, but whether this is a short or long-term trend will depend on factors including inflation, wage growth and inventories of homes for sale.

Market conditions can vary by location. Please be sure to consult with your trusted real estate professional to find out about market specifics in your area.