The Seattle Real Estate Market The post-Labor Day rush back into real estate this fall is composed of more sellers than buyers so far. Inventory levels are continuing to climb, and the overall Market Action Index for greater Seattle is continuing to fall towards equilibrium. Overall inventory is still historically low at just 2 months or so of inventory (a healthy real estate market has about 5 months of inventory), but we’re at least pointing towards market equilibrium. Despite buyers gaining some negotiating power, price per sq foot continues to move sideways. Onto Interest Rates... The mortgage bond got pounded last week, losing all of its technical support, and finishing the week down almost 130 points = Interest rates rose noticeably. Last week was not a big news week, but given that bond prices started the week at about their 12 month high, add in a little bit of festering fears over the Federal Funds Rate being raised sooner than later, and there was some pressure to the downside. Last week’s bond auctions went OK, but the real catalyst was the news to come out this week. This week we get to hear from Janet Yellen (Wednesday), as well as get our monthly reports on inflation (Producer Price Index comes out Tuesday, Consumer Price Index comes out Wednesday). The Inflation numbers have started to take center stage. It’s no longer employment numbers or news on tapering, it’s inflation; because the inflation number will be the number that keys the Federal Funds Rate and therefore interest rates. As long as inflation can stay low, the Fed will not be pressured to raise the Federal Funds Rate, but the second inflation begins to tick up, the federal funds rate will get a boost --> the mortgage bond will fall --> interest rates will climb. This is all domestic news though… Europe is still not looking great. • France just confirmed they will not be able to meet the ECB 3% fiscal deficit goal for another few years • Greek unemployment is 27%...and that doesn’t include the Greeks who have given up looking for work altogether • Italy is officially in a recession ...And all this BEFORE Europe create economic sanctions against Russia Japan announced on Thursday that they may begin a new round of QE to try and create SOME inflation. The Japanese economy has been stagnant for years, and with the world economy in the state it’s in, no better time than now to print some extra yen to see if they can’t kickstart their own economy via inflation. The problems abroad, and the tapering of domestic QE helps the dollar gain value. Great at the gas pump (have you noticed prices falling lately); great for mortgage bonds (because people want to hold dollars versus Euros or Yen); but not so great for the US multinationals. As the dollar gains value, US products will cost more overseas, and theoretically that will hurt exports --> which then somewhat REDUCES domestic inflation. There are so many forces to take into consideration; and so much more downside risk to raising the Federal Funds rate versus keeping it low for the time being that I can’t see the Fed actually raising it anytime soon. Hopefully inflation numbers will come out in check, and Janet Yellen reassures us that they’re not raising the rate anytime soon. If that happens, the mortgage bond may regain all that was lost this week, and all will be hunky dorey in my corner of the world again. Thats all for today. Cheers!
Posted on: Mon, 15 Sep 2014 17:49:20 +0000
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