Stocks on a roller coaster ride and Real Estate Still a Good Buy as Fed raises rates again

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Real Estate Agent with Allison James Elite CA. BRE 01501699
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Your home is probably the biggest asset you own. This is why you should hire a professional to guide you through all your real estate transactions. My goal is to help 24 to 28 families each year either buy or sell a home. I am NOT interested in Selling 100 or 200 homes a year because I would not be able to give each family the time, attention and energy they deserve....

The final days of December have the stock market reeling as the Dow could possibly have its worst year-end return since 1931, The Great Depression. All major U.S. equity indices are approaching bear market territory with the Nasdaq briefly hitting that on Thursday.

The Dow took a nosedive Wednesday afternoon as the market reacted to the Federal Reserve’s final rate hike of 2019. The markets continued to fall on Thursday with the Dow dropping another 464 points. The Fed raised its benchmark overnight lending rate by a quarter point, putting it in a range of 2.25 to 2.5 percent.

In the press conference following the Federal Open Market Committee meeting, Fed Chair Jerome Powell and other Fed board members cited an economy that’s growing in some areas and showing signs of softening in others. He said that makes their decisions less certain and more dependent on data. “There’s a fairly high degree of uncertainty about both the path and the ultimate destination of any further increases,” said Powell. “I think from this point forward, we’re going to be letting the data speak to us.”

The Dow and the S&P 500 are both in corrections with the Dow ending Wednesday trading at a new 2018 low. The global markets also plummeted, hitting two year lows, as fears of recession only grew stronger on the Fed’s announcement.

While the stock market may be sinking, that also means long-term interest rates are going down. When the Dow plummeted earlier this week, and the global market was shaken, bond yields also went down as investors looked for the safety of government debt. Many lenders posted rates below 4.6 percent earlier this week.

As Treasuries rallied after Powell’s announcement, yields dropped to their lowest point since April of this year. As the yields dropped, the yield curve between the 10-year and 2-year also continued to flatten while the 2- and 5-year yields inverted. The 10-year Treasury note briefly touched 2.75 percent, a yield not seen since early April. The 10-year note was trading at 2.78 percent in early morning trading on Friday.

Home sales and starts

Housing starts overall were up for November according to the Commerce Department’s report. However, this was mainly due to a large increase in multi-family housing.

Single-family home starts are struggling, down more than 13 percent from November of 2017. This was the third straight month of declining single-family housing starts. October’s housing starts, originally showing an increase, were revised down to instead show a decrease of 1.6 percent.

Analysts also expect that new home sales will once again see a decline. October saw a nearly 9 percent decrease in new home sales, according to the Census Bureau, which was a nearly 2-and-a-half-year low. The November report form the Census Bureau will be released on Dec. 27.

Existing home sales saw a bump up in November, increasing by 1.9 percent according to the National Association of Realtors. That’s the second straight month of increases in existing home sales. Sales are still down 7 percent from a year ago.

Home prices are still gaining as well. The median existing-home price for all housing types (single-family, townhomes, condominiums and co-ops) was $257,700, an increase of 4.2 percent from November of 2017.

According to the NAR data, unsold inventory is sitting at a 3.9-month supply which is better than where it was a year ago at 3.5 months. However, the NAR’s chief economist, Lawrence Yun, says the availability can be misleading. “Inventory is plentiful on the upper-end, but a mismatch between supply and demand exists at affordable price points.”

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ABOUT THE AUTHOR: 

GREG RICHARDSON - SENIOR ADVISOR OF CAPITAL MARKETS & STRATEGY

Greg Richardson is Movement's Senior Advisor of Capital Markets & Strategy and a contributing author to the Movement Blog. His weekly market update is a must-read commentary on financial markets, the mortgage industry and interest rates. Greg is an industry veteran who knows how to read the financial tea leaves and make complex industry data easy for loan officers, real estate agents and homebuyers to understand.

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Rainmaker
2,857,318
Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope 2019 is a great year for you.

Dec 30, 2018 05:17 AM #1
Rainmaker
508,652
Chris B Johnson REALTOR®
Allison James Elite - Moorpark, CA
5 Star Rated REALTOR® Quality, Not Quantity

Thank you Richard Weeks !! Here's to a great 2019 for the bothof us :)

Dec 30, 2018 01:11 PM #2
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3,151,188
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

It has most definitely been a week of uncertainty in the market, Chris! But, you're 100% right, real estate remains a solid investment - no matter the minor hike in rates. 

I hope you and yours have a wonderful New Year!

Dec 30, 2018 03:32 PM #3
Rainmaker
508,652
Chris B Johnson REALTOR®
Allison James Elite - Moorpark, CA
5 Star Rated REALTOR® Quality, Not Quantity

Thank You Debe Maxwell, CRSI hope you and yours have a wonderful New Year too :) 

Dec 30, 2018 03:43 PM #4
Rainmaker
2,940,263
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Goodmorning, Chris... people don't realize how low interest rates actually are by historical standards and that it's a good time to take advantage of them.

Dec 31, 2018 05:27 AM #5
Rainmaker
508,652
Chris B Johnson REALTOR®
Allison James Elite - Moorpark, CA
5 Star Rated REALTOR® Quality, Not Quantity

So very true Nina Hollander , it is #TimeToBuy !!

Dec 31, 2018 09:11 AM #6
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