Federal Reserve in Fantasyland: Implications for Housing Market
Immediately following the issuance of the Federal Reserve’s decision on Wednesday to increase the Fed Funds rate by 0.75% and the accompanying, optimistic statement and press conference, both bonds and equities rallied strongly, leading some to think – hope – that the worst was over in markets.
And then came Thursday, when equities resumed their plunge and bonds rallied further – on the belief that a recession was now likely. (See my Are we already in a recession?).
For my part, were it not so serious I would have allowed myself a louder chuckle as I heard Chair Powell say that the Fed would be “data-dependent” – and then forecast that inflation – using the Fed’s preferred measurement – would be 5.2% this year, 2.6% in 2023 and 2.2% in 2023. Based upon what “data” exactly? And what does all this mean for the housing market?
Fantasyland
If you google “Federal Reserve and Fantasyland” you will get a lot of hits. And while many of the comments from Wall Street insiders – particularly those working for investment banks who tend to be optimists – were supportive of the Fed, many of those with perhaps more objectivity were in the fantasyland camp.
The response to COVID
The world’s economy faced a major shock and challenge with the outbreak of COVID. In response the Fed acted swiftly – cutting the Fed Funds rate by 1.5% in two weeks in March 2020 – and with shock and awe – a huge program of Quantitative Easing – injecting vast amounts of liquidity into markets. The Fed became the main buyer of Government and Mortgage-Backed Securities (MBS) and its balance sheet doubled from $4 trillion to over $8 trillion: (more…)
Are we already in a Recession?
In January this year I published an article asking Can the Federal Reserve prevent a Recession?
My question now is: Are we already in a Recession?
I think the answer is yes. Here is the evidence, in three charts: (more…)
New Listings week ending June 17
Here are this week’s New Listings:
Click on these links for details: (more…)
Will the Federal Reserve show chutzpah today?
In my How far Behind the Curve is the Federal Reserve? report last weekend I suggested that the Fed needed to increase its Fed Funds rate by a full 1.0% today to regain control of the inflation narrative and asked if it has the chutzpah to do this.
The following table shows clearly that it has been the market fighting inflation by driving up interest rate – while the fed has continued with its easy money policy.
We’ll find out in a few hours how serious this Fed is about getting inflation under control.
And read these recent articles:
How far Behind the Curve is the Federal Reserve?
How quickly are houses selling?
Have Home Sales slowed?
June Housing Inventory: still way below 2020 levels.
Swampscott House on over 1 acre with HUGE potential
Marblehead Neck Oceanfront New Listing
Why are Mortgage Rates so high?
Time to Consider an Adjustable Rate Mortgage
The Federal Reserve and Mortgage Rates
Federal Reserve: “Make me responsible…. but not yet”
How Marblehead’s 2022 Property Tax Rate is calculated
Essex County 2022 Property Tax Rates: Town by Town guide
Guide to Buying and Selling in Southwest Florida
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, please contact me on 617.834.8205 or ajoliver47@gmail.com.
Andrew Oliver, M.B.E.,M.B.A.
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
m 617.834.8205
www.OliverReportsMA.com
“If you’re interested in Marblehead, you have to visit the blog of Mr. Andrew Oliver, author and curator of OliverReportsMA.com. He’s assembled the most comprehensive analysis of Essex County we know of with market data and trends going back decades. It’s a great starting point for those looking in the towns of Marblehead, Salem, Beverly, Lynn and Swampscott.”
__________________
Andrew Oliver, M.B.E., M.B.A.
Real Estate Advisor
Andrew.Oliver@Compass.com
www.TheFeinsGroup.com
www.OliverReportsFL.com
————
Compass
800 Laurel Oak Drive, Suite 400, Naples, FL 34108
m: 617.834.8205
New Listings mid-week June 15
Here are this week’s New Listings:
Click on these links for details: (more…)
Open Houses weekend June 11/12
Here are this weekend’s Open Houses (an updated list will be published tomorrow at 8 a.m.): (more…)
How far Behind the Curve is the Federal Reserve?
In March 2020, as the impact of COVID-19 was being felt, the Federal Reserve cut the Fed Funds rate by 50 basis points ( 0.5%) on March 3 and followed that with a 100 basis points (1%) cut on March 15th – a total of 1.5% in under two weeks. This emergency action was decisive and instrumental in preventing a financial disaster. But the economy quickly bounced back with a huge rebound in Q3 2020. The emergency was over.
The Fed, however, kept pumping huge amounts of cash into the economy. Eventually, the market decided that the Fed was behind the curve and market rates took off. Yet the Fed has been slow – make that very slow – to respond. This chart shows interest rates on January 31st 2020, the trading day before COVID-19 was declared to be a public health emergency in the US, and this Friday after the announcement that the Consumer Price Index rose 8.6% in May from a year earlier.
Does anything strike you about this chart? Such as the fact that all the market interest rates are up anywhere from 50% to 130% – and the Fed Funds rate is still way down from its pre-COVID level. (more…)
New Listings week ending June 10
A good number of New Listings again this week:
Click on these links for details: (more…)
Have Home Sales slowed?
Last week I published How quickly are houses selling? which showed that 88% of sales which closed in May received offers in 15 days or fewer.
But home sales are a lagging indicator, with May reported sales reflecting contracts agreed to for the most part in March. At the onset of COVID I started tracking the number of offers accepted on a weekly basis. This showed a sharp drop from mid-March 2020 which lasted only until early May, after which the number of accepted offers took off.
With all the publicity about the sharp jump in mortgage rates, the high level of inflation, concerns about a possible recession, etc. etc. one might have accepted to see a slow down in the number of accepted offers. This chart shows the weekly numbers YTD for 2021 and 2022: (more…)
New Listings mid-week June 8
A good number of New Listings again this week:
Click on these links for details: (more…)
Marblehead Facts and Figures Weekly Update
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How quickly are houses selling?
The following chart shows the percentage of sales each month where the offer was received in 15 days or less after listing:
Comment
Sales are a lagging indicator – May sales, for example, for the most part reflect sales agreed in March – but they do demonstrate the strength of demand – and the seasonality of the market in New England. I shall publish an article tomorrow showing the number of Accepted Offers week by week to show the level of current activity. (more…)
New Listings week ending June 3
We have seen a good flow of New Listings this week:
Click on these links for details: (more…)
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