Do You Remember Inflation?

20140309-080351.jpgWhile some may consider this a sarcastic question…we have not had really high inflation in the United States for some time. For example, in the past twenty years the retail inflation rate has averaged approximately 2.25% with an even lower number for the past decade. Two points about this. First, even low inflation rates can cause increases in the cost of living. For example, a 2.25% inflation rate over 20 years will increase the cost of living over 50%. Secondly, though low inflation rates can create issues in the long run, those who are older remember a U.S. inflation rate of near 10% per year from the period of 1973 to 1982. That was real “old fashion” inflation.

So if raging inflation has not been a problem for ten years, why bring it up now? Because the real reason we have had really, really low interest rates for the past ten years is the lack of inflation we have experienced. And if we really want to know when rates are going to go up significantly, we need to watch the data on inflation more closely. The reason rates trend up when we get good economic news is the fact that the markets feel that the Federal Reserve Board will raise short-term rates in response to the threat of inflation. Continue reading

Mid-Year Employment Reading

20140309-080351.jpgWe hope that everyone enjoyed the 4th of July Holiday. There were plenty of fireworks during the weekend but the day before the holiday started the government provided their own fireworks with the release of a strong jobs report for the month of June. Most analysts were expecting a decent gain in jobs at just over 200,000 and for the unemployment to remain steady at 6.3%. The numbers were stronger than expected, especially when considering the fact that the previous months of jobs gains were revised upwards.

In June the economy added 288,000 jobs which is robust by anyone’s standards. The unemployment rate dipped to 6.1% and the decrease cannot be attributed to people leaving the workforce as the labor participation rate stayed steady. Though these numbers are subject to revision in later months, the fact that ADP released a similar number for private payroll growth the day before just confirmed the fact that the job market is indeed heating up. What does that mean? Continue reading

The Oil Dilemma

20140309-080351.jpgIf you read the analyst’s projections, you get the impression that the price of oil should be falling because there is excess supply on the horizon. Demand is slowing in developed countries such as ours and new technology is helping us find oil where we have never gone before. “Tightening fuel efficiency standards for automobiles and changing consumer preferences look set to send U.S. gasoline demand back on the declining course on which it embarked in 2007,” the Paris-based International Energy Agency said in its latest forecast published recently. Of course, this report can’t predict political and other turmoil that occurs around the world. Continue reading

Planning Ahead when it Comes Time to Move

Moving%20PicWhether you are planning on moving soon — or helping someone else move, I’d like to share with you some tips on how to eliminate the stress on moving day.

  1. Plan Ahead – You probably know that you are going to move at least 30 days before the actual moving date. Create a “To-Do List” of when you need to turn off the utilities, notify movers and change your mailing address.
  2. Transportation – Will you depend on family and friends? Will you hire a rental truck and move yourself or do you need to hire professional movers for long distances? You will need to know how much it will cost you to move so you have time to shop around for the best price and service.
  3. Get Rid of Stuff – It can be overwhelming but now is the time to go room by room to choose items that needs to be thrown away, given away, sold (garage sale or online) or donated to charity.
  4. Take an Inventory – This is critical especially when hiring a moving company. You may want to list the major items, your collectibles, your expensive possessions. You may also want to take photos or video each room.
  5. Label Everything – Label at least 2 sides of each box with the type of room (kitchen, master bedroom, Amy’s room) and a short list of what’s inside the box.
  6. Valuable Items – Back up your computers before your move. If anything is valuable or breakable, double check to make sure it is insured. Take personal items, such as jewelry, with you.
  7. Pets – Hire a pet sitter or ask someone to take care of your pets on moving day. They instinctively know that you are moving. Keep them in a safe place until you are ready to make the move.
  8. Moving Day – Set aside a box of items that you may need on moving day. Hammer, screwdriver, toilet paper, cleaning supplies, light bulbs, bottled water, garbage bags and maybe even a change of clothes.
  9. Disconnect Utilities – Create a list of utility companies, including cable and internet, who you need to notify to make sure they are turned off and where the final bill will be sent. Record the date you called and the name of the person you talked with to make sure you don’t continue to received invoices.
  10. Neighbors – Say goodbye to your neighbors and let them know where you are moving to (that is, if you’d like to stay in touch). On the other side of the coin, introduce yourself to your new neighbors. They may have useful information about the community, schools and the neighborhood.

Continue reading

The Student Loan “Crisis”

20140309-080351.jpgA recession is like an earthquake. There are many aftershocks and if the earthquake is really bad, some of the aftershocks can be strong earthquakes in themselves. We have been dealing with the aftershocks of the recession for many years because of the severity of this recession. Today we are dealing with another one in the form of student loans. The President this month moved to ease requirements for those buried in student loans. Congressional action is being considered. How did we get here? The recession.

During the recession, younger people could not find jobs, so more went to college. Of course, they borrowed money to do so and when they graduated they have been burdened with big student loan debts. Only getting jobs was still not so easy. While this generation struggles with the debt loads and finding their way, it has affected household formation which affects our real estate market as well as other sectors of the economy. Easing repayment requirements will help, but in the long run this is another obstacle that must be overcome over time. Time may not heal all wounds, but a better job market solves many of the foundational problems we have faced. Continue reading

Beyond The Numbers

20140309-080351.jpgWe have received some good news over the past few months regarding employment growth. The creation of jobs is the most important function of the economy. When people can find jobs, this creates confidence. When people are secure in their jobs they tend to spend more. This includes large purchases such as houses and cars. Of course, the real estate sector is another huge factor within our economy. So, the next question is–how good are the job numbers? Here is the good news, May represented the fourth consecutive month of jobs gains over 200,000 and that is the first time that has happened since 1999.

On the negative side, the labor participation rate was 62.8%, which was unchanged from April. This is the lowest rate in decades. We do understand that this number is affected by the number of people retiring and with baby boomers aging there are record numbers retiring. But it is also affected by the fact that the population has been growing. A few weeks ago, we pointed out that the population growth of our country may be poised to present us with a housing shortage in the future. Well, it also means that we must create more jobs than ever before and that has not happened yet. Continue reading

Winning at the Real Estate Game – Get a Loan First

For years America has traditionally approached the home purchase process backwards. Potential home purchasers scour the earth for just the right home for weeks or months at a time. They then spend more time negotiating the best deal. Then the fun really begins when the purchaser approaches a lender and says: “Can you get me in the house ASAP? It took me so long to negotiate the deal that my landlord has rented my house and I have no where to take my family!”

Perhaps this situation is a slight exaggeration. Most do not spend six months in the purchase process and then expect to get a loan and settle in a few hours. Yet, the absurdity of the situation does not go away when the time frame is less ominous. Continue reading