There is an obvious relationship between the movement of stocks and interest rates. When the economy is doing better, stocks should also improve. This same stronger economy increases inflationary pressures which causes interest rates to rise. In addition, when stocks are doing well, more investors put their money in the stock market as opposed to bonds. So, on days that stocks are doing well, interest rates are increasing which means that bonds are not doing so well.
Seems simple, right? Look over the past five years and it is not so simple. For the past five years stocks have done very well as rates have stayed low. What was the cause? The precipitous drop in the stock market during the recession was a factor as much of this bull market is a rebound. Rates have stayed so low during the tepid recovery because the recovery has not been strong enough and there have been no inflationary pressures. In other words, day-to-day you are likely to see stocks rise and an increase in rates, but sometimes long-term trends paint another picture.
Why is this important? Long-term trends don't last forever. If the economic recovery heats up from here, we could see rates rise and perhaps stocks will get stronger or perhaps they will fall because investors believe higher rates will stall the recovery. Many think that the pop in rates we had late last year was a partial cause of a slower economy this year, especially with regard to real estate. So if you want to know what rates are doing, stocks are not the only factor. Watch economic reports such as the jobs data we have coming out this week. Full employment would translate into inflationary pressures. However, we are a long, long way away from full employment.
First-time home
buyers have been a sluggish segment of the housing market in recent years, but
Barclays equity researcher Stephen Kim is betting on their return. Kim recently
released a report, “The Return of the First-Time Buyer,” which outlines three
reasons why he believes first-timers will soon be back. In fact, he’s betting
that entry-level buying will be a key theme in homebuilding industry this year.
Kim says that job growth is reaching an important threshold for improved
household formation. “The cumulative number of jobs created over the past
several years has now reached the point where each new job will drive greater
household growth,” Kim writes. Also, Kim points to the loosening of credit,
with more lenders showing willingness to lend to borrowers in the 600-700 FICO
range. Kim also notes that buying a home is still about 20 percent cheaper than
renting, and the affordability of housing will be an attraction for
first-timers to enter sooner rather than later before rates and home prices rise
more. However, Kim mentions there is one big hurdle first-time buyers will
continue to face: Student loan debt. Source: Barclays and HousingWire
Properties sold
faster in March — at a median of 55 days — due to low inventories of homes for
sale nationwide, according to the latest Realtors® Confidence Index. The
index is based on a survey of more than 3,800 Realtors® about their
transactions in March. Short sales were on the market for the longest period of
time -- 112 days in March compared to 98 days in February. Foreclosed homes
were on the market for 55 days. About 37 percent of real estate professionals
report that properties sold in March had been on the market for less than a
month. In February, 34 percent of practitioners reported the same. Buyer traffic
was also up in March, although demand was softer than a year ago, according to
the report. Still, Realtor® confidence about current market conditions ticked
up in March, reflecting a typical seasonal increase. Their confidence about the
outlook for the next six months also improved but is lower than what it was a
year ago. The biggest concerns among Realtors® remain low levels of
inventories, tight credit conditions, and uncertainty about flood insurance
regulation, according to the Realtors ® Confidence Index. Realtors® continue to
be confident that prices will increase over the next 12 months but at a “modest
pace.” They expect prices to increase at a median of about 4 percent over the
next 12 months. Source: NAR
After buyers
move in to their new home, they should be prepared for some home fixes to
present themselves each season, says Rich Escallier, a handyman in Chicago.
"If you can go six months without finding something that raises your blood
pressure, you're lucky,” Escallier says. CBS MoneyWatch recently released
a checklist of routine maintenance and small home repairs that home buyers
should expect to do their first year to help avoid more costly problems from
surfacing later on:
·
During move-in week: Turn on all
major appliances and run them for a complete cycle. Even if the buyer already
completed a home inspection, they should test again, experts say. After all,
“if you have a minor leak under the dishwasher, that water leaks into the
subfloor and you can't see it," says Daniel Cipriani with Kade Homes &
Renovations in the Atlanta area. "But you'll start to notice the hardwood
floor buckling."
·
45 days after move-in: Change the HVAC
system filter and vacuum out the air intake vents. “Capturing dirt and dust with
the right filter can go a long way toward preserving the new home appeal for a
few years,” CBC MoneyWatch notes.
·
Six months after move-in: Inspect the
exterior of your home in both the summer and fall to ensure rainwater is
draining away from the home properly. Also, clean out clogged gutters and
downspouts. "Landscaping should be negatively graded away from the
house," Cipriani says. "People don't think it's a big problem, but
otherwise water pools against the foundation and doesn't have anywhere to go."
·
Every year: Inspect the
home’s roof for any missing shingles and gaps around the chimneys. Also, check
the ceilings inside the home for any water spots and indications of potential
leaks.
·
Every two years: Hire a
professional HVAC contractor to inspect their furnace, air conditioner, and hot
water heater. A ruptured reservoir could potentially spill 40 gallons of water
in a mere few hours so experts recommend home owners install a water alarm with
sensors in the collection pan underneath the hot water heater. The sensors cost
about $25 and can help save home owners from costly water damage. Source:
CBS MoneyWatch
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