I was expecting stocks to take a hit but the tech stocks didn’t see much impact.
Should we expect something similar for RE in Bay Area ? How soon do you think we would know ?
Short term predictions are speculative. When we expect, stocks won’t go down. When we do not expect, stocks will come down in 2 or 3 days. If someone is able to clearly predict (whatever way), he/she can make billions ! Tomorrow, it can even go up (yes, just seeing DOW Futures are up 33 points !) and DOW may even reach 20000 before Dec 31, 2016.
It is unpredictable.
There are some questions asked about RE
Home prices have never fallen in a year with a rate hike. I guess there’s always a first time, but I wouldn’t bet on it.
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Home prices have never fallen in a year with a rate hike : Fall will start after the end of last rate hike as it happened in year 2001-2 and year 2008-9
As per FED, next year 3 rate hike and then 3 more in 2018. How much FED can apply on rate depends on how economy is going. When Trump cuts tax, deficit financing and money printing mandatory. Strong US growth is very likely as a result of reduction in corporate tax.
However, mortgage rates started going up. This will put a stop on spiral increase.
However, Fed has changed their rate hike approach. Used to be up 0.5% first time, then 0.25% every meeting then stop… economy goes into a recession. Now is 0.25% first time, wait long long, then another 0.25%… may be wait very long before another 0.25%… Why would market behave similarly as before?
Why would market behave similarly as before?
I listened to Janet Yellen conference, almost 45 mins conference, and she was asked the same question. She replied that FED is transparent as much as possible and that market is sensing the same growth FED is seeing and behaving like that.
Used to be up 0.5% first time, then 0.25% every meeting then stop… economy goes into a recession. Now is 0.25% first time, wait long long, then another 0.25%… may be wait very long before another 0.25%…
Yes, FED main intention in year 2000 and 2008 is to stop abnormal growth and inflation, but current intention is to limit inflation as there is no abnormal growth or inflation exists.
They may slow raising rate or even stop raising rates, but Yellen said there is likely be rate raise for next 3 years. She said average fed rate will be 1.4% next year, then 2.1% by 2018 and then 2.9% in 2019.
With this economy or stock market may fluctuate, but will not fall until 2019. FED main intention is not to create recession or correction.
I guess real estate may grow slow or stabilize in view of reduction in mortgage eligibility, but foreclosures may not happen or short sales will not happen.
Yellen said economy or job market continue to stay in the same phase next 3 years. In short, effects of mortgage rate, lower eligibility results slight reduction in competition, may reflect in real estate.
I agree with Marcus statement, RE will unlikely fall.
Getting 10% or 15% down from current real estate price - if I guess right - will not happen in near future.
The fed isn’t smarter than anyone else. They are guessing just as much as everyone else as to what they should do. All the current fed people heavily studied the great depression. It’s widely believed the fed caused the double dip by raising rates too quickly. No one wants to repeat that mistake.
There’s an interesting trend if you look at what the effective rate was when prior recessions started:
1981 19.04% to a low of 5.85%
1990 8.15% to low of 2.92%
2001 5.31% to a low of 0.98%
2007 4.24% to a low of 0.07%
Each time the rates are lower when we start the next recession. That means each time they have less and less room to cut rates to improve the economy.
Rates can go negative
These are history, for sure, guiding everyone.
Remember the difference between that time FED data analysis and current FED data analysis. After 2008 great depression, FED is collecting big data and running computerized analysis, stress test data…etc to find the risk before the move next step. This was absent in previous times. This is the main reason, they measure every time, monitor and then push forward.
Fed was extremely nervous about increasing the interest rate which explains that it is hard for anyone to predict the impact. They are doing it slowly to avert any big surprises.
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Election is over, fed can raise rate more freely. Hope the fast raise will keep inflation at check.
Umm. Inflation is still under 2%. It’s in check. I’d consider under employment and lack of work force participation much bigger issues.
Consequences of technology advancement. Don’t need that many workers. We should spend our time, exercising and entertaining ourselves.
What do you suggest for people that aren’t wealthy and need an income?
Ask Trump or do the obvious, be an entertainer, sportsman or trainer.