“Party on, dude” says the Federal Reserve
Former Federal Reserve Chair William McChesney Martin, Jr famously said: “The Federal Reserve…is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.”
This week, current Fed Chair Jerome Powell in effect said “party on, dude.” As the New York Times commented: “The official view of the central bank’s leaders now is that it has been an overly stingy host, taking away the punch bowl so quickly that parties were dreary, disappointing affairs.
The job now is to persuade the world that it really will leave the punch bowl out long enough, and spiked adequately — that it will be a party worth attending. They insist punch bowl removal will be based on actual realized inebriation of the guests, not on forecasts of potential future problematic levels of drunkenness.”
Chairman Powell’s comments
“We will continue to provide the economy the support that it needs for as long as it takes.”
“We’re not going to act pre-emptively based on forecasts for the most part, and we’re going to wait to see actual data. And I think it will take people time to adjust to that, and the only way we can really build the credibility of that is by doing it.”
“People start businesses, they reopen restaurants, the airlines will be flying again — all of those things will happen, and it will turn out to be a one-time bulge in prices, but it won’t change inflation going forward.”
Interest rates and inflation
The big questions overhanging financial markets are what will happen to inflation and to interest rates. (more…)
So, how much have house prices gone up?
Anecdotally, we have all heard about how prices outside Boston are booming, as people move out of the city, but how much have prices actually gone up?
Because small numbers can – and do – produce misleading statistics, I look for large numbers, as in my quarterly reports. I have, however, calculated the monthly median prices for Essex County SFHs and for Boston condos. After these charts, I will also give an early indication of what the third quarter will look like in Marblehead and Swampscott.
Essex County SFH
This chart shows the monthly median prices for the last 4 years. The blue top line is 2020. After being around $500,000 for the first few months, the median price moved to $545,000 in July and to $575,000 in August. These are, of course, monthly numbers which can fluctuate, but it is also worth noting that the numbers for August refer to sales contracted in June for the most part.
This table shows the quarterly progression. Q2 and Q3 are normally the highest quarters for the year.
Boston Condos
This chart is less clear, but the table below shows that median prices are little changed from 2019 YTD and have been declining quarter by quarter in 2020.
Marblehead and Swampscott
After being below $700,000 in Q1 and Q2, the Q3 median SFH price will blow through not $700,000 but $800,000 – and comfortably at that.
In Swampscott, however, the median SFH is likely to be similar to the 2019 level. Some interesting analysis when I write my Q3 reports.
Goodbye Boston, Hello Marblehead
Housing Inventory chronically low while demand is strong
Mortgage rates dip below 3% – where to next?
Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
“If you’re interested in Marblehead, you have to visit the blog of Mr. Andrew Oliver, author and curator of OliverReports.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.”
“Home prices drop for the 12th consecutive month.” Really?
The above headline is from a recent article written by a mortgage broker. (Not the “really?” That came from me.)
The next headline in the article was: Appreciation slowdown hits the one-year mark.
And then it read: According to new data from CoreLogic, March marked one full year of slowing growth for U.S. home prices. They rose just 3.7 percent between March 2018 and March 2019 (my italics).
Ah, so now we are getting to the truth. The rate of increase has been slowing for the last year, but prices are still 3.7% higher than they were a year ago.
Let’s look at two charts. The first, the point in the headline (however incorrectly worded) shows the rate of growth:
The second shows actual home prices:
Now, when I buy a product, let’s say a pineapple , I ask “what’s the price?” I don’t ask: “how much has the cost of this pineapple gone up in the last year?” Unfortunately, I cannot buy the pineapple at last year’s prices – I have to pay today’s price. Same with houses.
The annual compound rate of growth in national house prices from 2000-2018 was 3.6%. None of us buys a “national average” house nor pays a “national average” price. As buyers and sellers know only too well, many factors – many of them emotional – go into the decision to buy or sell a house. And for the vast majority of people buying a house is buying a home, a place to bring up a family.
I have been saying consistently since late last year that my outlook for 2019 was for a slowing, but still growing economy and, locally, for a stable housing market.
In last week’s article Why are mortgage rates plummeting? I quoted the Wall Street Journal’s Editorial Board: “The biggest economic risk of a Donald Trump Presidency has always been that his trade obsessions would swamp the benefits of tax reform and deregulation. For two years he has kept his worst protectionist impulses mostly in check, but as he seeks a second term we are now seeing Tariff Man unchained. Where he stops nobody knows, which is bad for the economy and perhaps his own re-election.”
And here is another quote this week from the same source: “The stock market on Friday rallied as investors bet that the Federal Reserve will cut interest rates to counter trade uncertainty. But as we learned in the Obama years, monetary policy alone can’t overcome bad fiscal, trade or regulatory policy. The May jobs report is a flashing yellow light that Mr. Trump needs to settle his trade wars and get back to promoting growth.”
The reason that interest rates and mortgage rates are dropping (the Freddie Mac 30 year FRM was 3.82% this week) is the slowing economy and increasing uncertainty caused by the President’s tariff obsession. Should the economic numbers continue to herald a significant slowdown the Federal Reserve is indeed likely to cut rates to try to stimulate the economy. Last year the Fed increased interest rates in order to prevent the huge tax cuts over-stimulating the economy and causing inflation. I think the Fed did a good job last year and I would expect it again to act to add stimulus to try to counteract the negative impact of tariffs and tariff threats.
I shall end by repeating the last sentence of last week’s article: “The natural tendency and hope is that all these issues will blow over quickly and not have a damaging effect on the economy. But the bond market is sending out warning signals.”
Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
www.TeamHarborside.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
Are home prices falling?
Sometimes I think headline writers are deliberately trying to convey a false impression.
Take this will home price appreciation fall? article in the Daily Dose. Ok be honest, if you read this headline quickly, would you think home prices were going up or falling?
or 
(more…)
8 Predictors of Housing Prices
The National Association of Realtors has published a report looking at different factors as predictors of housing prices.
The study looks at 8 factors:
– gas prices
– proximity to Trader Joe’s or Whole Foods
– proximity to sports facilities
– legalization of marijuana
– effect of temperature change
– nearness to casinos
– closeness to highways
– whether there are trees on the street
Click here to read the report and find out how these factors affect housing prices.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or Andrew.Oliver@SothebysRealty.com.
Read Which broker will actually sell my home?
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
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Essex County town by town home prices compared with the peak
In a week when the National Association of Realtors reported that nationally home price have surpassed their 2006 peak I have looked at median SFH prices town by town in Essex County for the first half of 2015 compared with the first half of 2006.These numbers show that median prices in both Essex County and Massachusetts are back to 2006 levels, but with wide variations from town to town.
Here’s the table: (more…)
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