Monthly Archives: April 2011

April 27, 2011 FOMC Decision/Press Conference

Posted on by

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

April 27, 2011 FOMC Decision/Press Conference

“…the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually.”

Rate Decision: Fed funds rate maintained at a range between 0% and 0.25%

This was a very interesting day in the history of the Federal Reserve. There was a usual meeting but then the Fed released its updated forecast and for the first time in its history, the Fed Chairman had a formal press conference. Not surprisingly, not a whole lot of news came out of the new procedures but at least the Fed members are showing they are trying to better inform the public about the reasons and purposes of their policies.

Let’s start with the statement. As expected, rates were kept stable. The economy is hardly in any shape, given the surge in gasoline prices, to absorb a rate change or any indication that a rate change might be on the horizon. The Committee reiterated its view that it “continues to anticipate that economic conditions … are likely to warrant exceptionally low levels for the federal funds rate for an extended period.” There was also an affirmation of the intention to complete QE2 on schedule. The clear message here is that there are no current expectations that QE3 will be needed.

There was, however, a small change in the description of inflation. The FOMC did acknowledge that “Inflation has picked up in recent months” though it still described commodity price pressures as “transitory”. It advised that “it will pay close attention to the evolution of inflation and inflation expectations.” In addition, the Fed’s estimate of core inflation was raised to a more realistic 1.3% – 1.6% range. The implication is that by the end of the year, core inflation could be about 2%. That is about as high as the members would like to see it given their long range forecast. As for growth, the members reduced their expectations for 2011 and for the next two years, though the adjustments were not large. The Fed members believe inflation will be higher this year and growth will be slower than forecasted in January.

Finally, there was the press conference. The Fed Chairman handled himself in the way expected: He presented his views in an expanded manner but didn’t ruffle any market feathers. He argued the Fed could pick the correct time to start raising rates but stated that the course of the economy would determine the timing. He noted that while short term inflation was a concern, inflation expectations were not rising enough to alter policy. He did comment that with inflation rising, it would be difficult to be more aggressive, so further aggressive actions are not likely, especially if his projection of stable or even falling gasoline prices occurs. He defended the Fed’s policy as it affects the dollar by simply arguing that stronger long term growth, which he believes will happen, would strengthen the dollar in the future. Basically, Mr. Bernanke made no mistakes, added little to what we know but did show, at least to the public, that he understands their concerns and would do the best he could to get the economy and payrolls growing faster.

Re/Max Connection Realtors disclaimer:
Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

Getting Your Home Ready to Sell

Posted on by

Getting Your Home Ready to Sell

You would never dream of inviting guests to your house without making certain preparations, so don’t invite potential buyers without first making the necessary updates by preparing your home to sell. If you are like most sellers, you want to get as much as possible for your home and you want to do it as quickly as possible.

Letting Go

After you’ve lived in a house, it becomes much more than four walls and a ceiling. It’s a home and it has a lot of good memories. Your first step to preparing your home to sell is to realize that you will take these memories with you wherever you go, but you won’t be taking the house. It can be difficult to let go, but the task will be much easier if you start to think of it as a new beginning rather than an ending.

Cleaning House

An important part of getting your home ready to sell is in staging the decor for potential buyers. When you stage a home, you create an environment that is free of any personal items, such as photos and/or anything that stands out as being customized for you or your family. When a potential buyer walks through your home, they need to envision their belongings and decor without being distracted by yours. While these items may be special to you, they could possibly prevent the buyer from being able to imagine their own style complimenting the home.

In addition to removing any personal items, make sure that you remove any clutter from the home. A clean home seems larger and more inviting, whereas a lot of stuff lying around could give the impression that the home is too small or cramped for storage. Pack up any knickknacks, remove your children’s drawings from the refrigerator and clean up your counter space in both the kitchen and bathrooms.

Staging Your Home

Now that your house is clean, it’s time to put the finishing touches on the staging process. A solid, neutral shade in a tablecloth should be selected for the dining room table. Depending on your decor and wall coloring, a solid white, sand or ivory covering will work well. In the center of the table, a vase with fresh cut flowers (or silk, if you have allergies) will add a nice accent. Did you know that the kitchen and bathroom are two of the main selling points to any home? Keep this in mind when preparing your home for potential buyers.

The living room should have one focal point, whether it be a fireplace or breathtaking view of the outside world. If you have too many features screaming out at potential buyers, they may feel overwhelmed, so focus on one aspect and make it shine. If you have a mantle, line it with three candles that match your decor in color. Place a large candle in the center with one smaller one on each end, which will be reminiscent of a perfectly matched bookend set. A home with a stunning view should have window dressings that accent the positive, instead of hiding it. If your furniture has a design of any kind, mask it with a solid slipcover to compliment the flooring or wall color. Some homeowners also add a fresh coat of paint to their home, which will bring life back into a fading color. Turn on the lights and open the blinds and draperies to create a bright and inviting environment throughout your home.

Where To Store Your Stuff

Now that you know how important it is to remove any clutter and oversized or bulky furniture, you need to know where to put it. If you already have a new home, you can simply move it there. Otherwise, you can put it into storage until you are ready to move. It’s important to leave some essentials in your former home for potential buyers to see, such as a dining room table, a sofa and chairs, bed, etc. Any additional furnishings that seem to interrupt the flow of your home, or make it feel cramped, should be removed. You do not want potential buyers to feel as though the house is too small.

Details, Details, Details . . .

As a final strategy to prepare your home to sell, make sure that you have any carpet stains removed, windows cleaned, fresh linens placed in the bedrooms and bathrooms, etc. You would be surprised how many people pay attention to even the smallest of details, so be sure to fix any small repairs that could be a turnoff for buyers. Last but not least, make sure your home looks just as good on the outside as it does on the inside. This means that your lawn should be cared for, flower beds must be maintained and any outdoor clutter must be removed.

Re/Max Connection Realtors disclaimer: Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

March Existing Home Sales

Posted on by

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: March Existing Home Sales
KEY DATA: Sales: +3.7%; 1-Family: +4.0%; Condos: +1.6%: Median Prices (Year-over-Year): -5.9%

IN A NUTSHELL: “There are some signs of life in the housing market with a lot of it coming from the recycling of distressed homes.”

WHAT IT MEANS: After seeing that new home sales improved, everyone was expecting a solid increase in existing home demand. The National Association of Realtors reported that sales of existing houses did rise a decent amount in March. However, the level of sales is still quite depressed and was off fairly sharply from the March 2010 sales pace. Of course, the government incentives were still in the market at that time but much of the sales burst occurred later in the spring. Still, conditions are getting better as the improvement was spread across most of the nation with only the West posting a modest decline. Investors continue to drive the market and were about 22% of the purchasers in March, up from 19% a year ago. They love those cheap distressed homes, which now make up 40% of the market. Given the tight lending standards cash buyers are more than welcome. To get a Fannie or Freddie loan (which are the only games in town) a borrower has to have a credit score of about 760. With distressed homes a growing proportion of sales, it was not surprising that prices were down pretty sharply over the year. The supply of homes for sale rose for the second consecutive month. I consider that to be a sign that sellers have growing confidence in the market.

MARKETS AND FED POLICY IMPLICATIONS: Home sales are on the rise and the latest data from the Mortgage Bankers Association indicating the mortgage applications is rising is a further indication that the market is slowly improving. That is not to say it is strong or will be strong anytime soon. Still, the weakest link is beginning to put on a touch of muscle and if the trend continues, by year’s end conditions should look a lot better. Indeed, housing is not the biggest threat to the economy: it is oil. If oil prices continue to rise the expansion is not going to gain a whole lot of traction. The economy was changing gears when the price surge hit. Now we are looking at even softer growth during the first half of the year than I had and I was near or at the bottom of most forecasts. If much of the oil rise was uncertainty over supply (a polite phrase for speculation), then we should see a decent unwinding of the increase. That could come this summer and propel the economy forward during the second half of the year. I still expect that to happen. But for now, it is wait and worry about oil as the impact is rising as confidence is falling. That, of course, only reinforces the view that the Fed will complete QE2. As I noted a couple of months ago, the Fed will likely withdraw liquidity through a three stage process: First will be the completion of the quantitative easing with reinvestment of maturing assets and interest continuing. Then they would stop reinvesting. Finally, there would be actual rate hikes. That is a slow process that should start in June with the first rate hike coming at the end of the year.
Re/Max Connection Realtors disclaimer:
Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

March Housing Starts and Permits

Posted on by

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: March Housing Starts and Permits
KEY DATA: Starts: +7.2%; Permits: +11.2%

IN A NUTSHELL: “When the weather outside wasn’t frightful, housing became a touch more delightful.”

WHAT IT MEANS: Now that the weather is warming up, we shouldn’t forget that there were a couple of months when conditions were truly brutal. It was not a major surprise that housing activity cratered in the first two months of the year so we should not be shocked that once it was actually possible to put the shovels into the ground, home construction improved. In March, housing starts rose solidly. There were huge increases in the Midwest and West and a solid improvement in the Northeast. The only region which posted a decline was the South. In addition, January and February’s start numbers were revised upward. It looks like housing will actually add to growth during the first quarter and that could ease the fears that growth could come in quite low. Looking forward, construction is likely to rise as we move through the spring given the strong rise in permit requests. Except for the Northeast, which was flat, builders took out a lot more permits in March and they are not doing that because of any regulatory change, as they did in December. Instead, the rise is likely the result of growing demand and expectations. Builders are doing a good job of keeping inventories under control as the number of houses under construction fell to another historic low.

MARKETS AND FED POLICY IMPLICATIONS: Home construction picked up solidly in March and activity should rise going forward. That is the good news. The bad news is that we are at record lows for homes under construction and completions while the number of housing starts remains not that far from the record low set in 2009 during the depths of the recession. But when it comes to GDP growth, it is all about changes not levels so housing should be a positive for growth this year. Of course, housing has become a much smaller part of the economy, constituting less than 2.5% of GDP at the end of last year. It was over 6% in 2005 and has average about 4.3% over the past thirty years. Thus, it takes a lot larger growth rate to have any major impact on the overall economy. Still, up is an awful lot better than down. That is good news for the markets which have been dealing with the reality that higher energy costs are not the tonic for a weak economy. But the Saudis announced they were cutting production because of the oversupply of oil, a point noted by OPEC. The members remember that when speculation gets carried away and prices surge above sustainable levels, the downside can be painful. It is impossible to forecast changes in speculative attitudes but I suspect that the upward momentum in oil is slowing and that could turn things around quite quickly. At least let’s hope so. As for S&P putting U.S. Treasuries on the watch list, remember, this is an organization that didn’t understand housing debt or European debt. It is incomprehensible that the debt limit will not be lifted so maybe we should just relax. The U.S. is not going to default.
Re/Max Connection Realtors disclaimer:
Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

The Benefits Of Home Ownership

Posted on by

The Benefits Of Home Ownership

The decision to purchase a home is exciting and a major investment for your future. Because there is only so much of it to go around, real estate is the top choice for many investors and the desire for most families. This article is designed to highlight some of the many benefits of home ownership and how buying a home can often turn the American Dream into a reality.

One of the most profitable markets in real estate is rentals, which means that many families are paying to live in a home that isn’t their own. In some cases, renting a home is necessary. For all others, the money that would be spent on rent could instead be used to pay a mortgage. In fact, monthly rent payments often exceed that of a typical mortgage payment. One of the greatest benefits of home ownership is putting money into something that you can call your own and knowing that the monthly payments are going toward your home’s equity.

Speaking of equity, many properties experience a growth in value as more development moves into the area or the economy strengthens through an increase in job opportunities. If this happens, home values soar and owners can bask in the glory of their newfound profit. When you purchase a new car, it depreciates the moment that you drive off of the lot. When you buy a home, however, it has the potential to appreciate year after year. There are few things in life that can offer you a return above and beyond your original purchase price, but a home can.

When you own a home, you will enjoy the freedom of decorating and making any changes that you choose without needing the permission of a landlord or property owner. In addition, you may even be able to use your home’s equity to finance some needed improvements and/or repairs. In some cases, these changes may even increase the value of your home. An upgraded kitchen or bathroom, hardwood flooring or an additional room are examples of changes that could result in added value.

Another advantage of home ownership is the tax benefits that are available. The interest paid on a home mortgage as well as most property taxes paid are tax deductible. For additional information on deducting mortgage interest and property tax, consult the IRS or a tax professional.

In addition to providing yourself and your family with a feeling of stability and permanence, home ownership can also help strengthen your credit profile through timely mortgage payments and a steady financial history.

Re/Max Connection Realtors disclaimer:
Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com