This Week in Real Estate - 9-25-2015 - Fed Chair makes waves

Federal Reserve Making Waves

To use my favorite Yogi Berra quote, “It’s like déjà vu all over again.”

At the beginning of the year, the Federal Reserve announced that it would be raising rates this year. Initially it was thought to happen in June, but the Greek Debt Crisis pushed that back to September. Just last week, the Fed decided to postpone the rate hike. But …

Yesterday Janet Yellen was speaking at the University of Massachusetts, Amherst and not only talked about raising rates, but also ended the speech abruptly with some concern over her health.

Any questions about Yellen's own health could unsettle financial markets that have been skittish about the health of the global economy and the impact of a Fed rate hike, which could rock bond markets and suck capital from emerging markets.

In her speech, Yellen said she expects to begin tightening policy later this year as long as inflation remains stable and the U.S. economy is strong enough to boost employment.

Recent global economic and financial market developments do not significantly affect the U.S. central bank's policy, she said.

That message, along with Yellen's contention that recent inflationary weakness is likely transitory, may come as a surprise to some investors who took last week's policy decision by the Fed as a sign that a U.S. policy tightening was no longer imminent and would likely come next year.

Much of the recent price weakness, Yellen said, is due to special factors such as a strong dollar and low oil prices, which are likely to fade, allowing U.S. inflation to rise to a 2 percent goal over the next few years.

Yellen said that both she and the policy-making Federal Open Market Committee (FOMC) expect the world's largest economy to be strong enough to achieve maximum employment and to keep expectations for prices stable.

"Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter," Yellen told hundreds of students and local residents at the University of Massachusetts, Amherst.

As it stands, she said, U.S. economic prospects "generally appear solid."

The Fed's decision to hold off raising rates for the first time in nearly a decade was somewhat expected, given a recent selloff in global financial markets that was sparked by fears that China's economy is weaker than expected.

But economists and investors reacted to Yellen's cautious tone last week by complaining of mixed messages and pushing expectations of a rate hike out to March of next year, from December previously, based on futures markets.

Yellen, however, said it was best not to delay "too long" what should be a "quite gradual" pace of future rate hikes. "The more prudent strategy is to begin tightening in a timely fashion and at a gradual pace, adjusting policy as needed in light of incoming data," she said on Thursday.

-Kris

I wanted to keep the tips of the week focused on our community.

Again I wanted to use another quote.

“The reports of my death have been greatly exaggerated.”

Last week, many of you may have read in the Napa Register that the Pathway Home for Veterans in Yountville was shutting down. Unfortunately, when I read that article, I thought the worst.

The Pathway Home provides uniquely successful treatment to a small group of veterans every year in Yountville. Through live-in group therapy, this program provides a soft landing/transition for these servicemen most affected by the experiences of the war.

The program for the last 7 years has been 100% funded by private donations. No federal fund, No Veterans Administration fund, No Insurance Funds. In those 7 years, over 400 lives have been saved. Now that we have a proven model of success, we need to replicate this model to be in cities around this country. In the next few months, the Pathway Home will be concentrating their efforts of building a sustainable funding model to accomplish this goal.

So instead the headline should have read, The Pathway Home is expanding.

Last night the real estate community of Napa came together for an event to honor and support the Pathway Home program. We were proud to hear from a recent graduate of the program. I was proud to be a part of raising over $10,000.

Every transaction I complete helps the Pathway Home. My goal is to be able to give over $5,000 to the Pathway Home this year. I am ahead of schedule with over $3,000 donated so far.

-Kris

This Week in Real Estate 9-18-2015 - Fed holds steady

Helping Fire Victims

Since last Friday nearly 600 families have lost their homes in the Valley Fire. This devastation has hit home and there are a lot of ways you can help.

The first thing that is needed is kindness. Kindness in the form of prayers, hugs, warm meals, words of encouragement, and donations.

Collectively the North Bay Association of REALTORS has given $20,000. The Napa Vintners have pledged over $250,000 and more and more keeps coming in.

You don’t have to look far to find a worthy cause to help support these families.

We are all blessed to be in our community. Reach out to help those in need.

Federal Reserve holds steady at 0

At the beginning of the year, the Federal Reserve announced that it would be raising rates this year. Initially it was thought to happen in June, but the Greek Debt Crisis pushed that back to September.

Now with the recent global financial turmoil, most likely China’s worries, they would not be raising the short term lending rate at this meeting. CNN reports “Although they didn't raise rates now, the majority of Fed committee members believe there will be a rate hike in 2015, according to its economic projections. The committee has two remaining meetings this year -- in October and December.”

This means that we will likely see mortgages rates remain steady in the low 4% range for the next 2-3 months.

The whole article is here at:

http://money.cnn.com/2015/09/17/news/economy/federal-reserve-interest-rates/

-Kris

This Week in Real Estate 9-11-2015 - New Home Construction

Thought of the week

Every year on September 11^th, I remember exactly what I was doing. I was glued to the television like the rest of America. Watching in disbelief of what I was seeing. Praying, screaming, calling all my friends and family in Boston and New York, and crying.

Every Year, the REALTORS in Napa hold an event in September to support the Pathway Home. A way to recognize the men and women of our armed services that have given so much for the freedoms we enjoy.

This event is a tour of some amazing luxury properties in Napa followed by a meal and a silent auction and raffle.

This year we are raffling off a signed picture of Jerry Rice catching his record setting 127^th touchdown. We are selling ONLY 127 tickets, one for each touchdown, at $10 each for this great piece of sports memorabilia. If you would like a ticket or two, please let me know.

If you would like to just give directly to the Pathway Home. Please visit http://thepathwayhome.org/

Thank you and God Bless America

Impact of New Construction on the market

I wanted to expand on the article in the Napa Valley Register that came out this week.

http://napavalleyregister.com/news/local/growing-demand-sparks-construction-of-single-family-homes/article_bf776b84-d1b5-5d64-b377-f1aed386fecf.html

To show the demand for new construction, look at this chart.

Tax records for all homes built in the last 10 years with a Napa address

(not necessarily in the city) This includes all new construction including single custom builds.

2005	203
2006	248
2007	248
2008	122
2009	138
2010	46
2011	61
2012	86
2013	36
2014	21
2015*	10

*Jan - July 2015

As you can see we are way behind the demand. Per the article if 1,000 new residents move to Napa annually. The average household size per the 2010 census is 2.69. Therefore to keep up with growth, Napa would need to build approximately 370 home per year to maintain the supply and demand curve. Since 2010 there have only been 250 new homes built in Napa.

I think that there is more need for new construction in the area.

-Kris

This Week in Real Estate 9-4-15 - What will the Fed do?

Will the Fed Raise Rates?

The recent stock market volatility, the concerns over China’s slow down, and the growing concern over Europe again have combined to create a great deal of uncertainty regarding the Federal Reserve’s actions in September.

For the majority of the year they have been stating they will be raising the short term interest rate for the first time in 6 years from essentially 0 to 0.25%. This would be a bright signal that the US is doing very well; our economy is still building, growing and stable.

BUT, now all of the markets are on pins and needles regarding this forecasted decision.

If rates go up so will mortgage rates most likely. A 0.25% change is significant when our rates are hovering around 3.5-4.25% this could be a change of 5-7% in the cost of financing.

So now it seems that all the prognosticators are looking for today’s Jobs Report. If our jobs are anything but spectacular, most think that the Federal Reserve will just wait until December or next spring to make a change.

CNN Money had this great article regarding this:

“We will find out how many jobs America's economy added in August and whether wages are finally growing.

But this time the news goes beyond jobs and wages -- a big decision looms in less than two weeks for America's central bank, the Federal Reserve. And it seems to be coming down to the wire, where the jobs report could be the deciding factor.

"It should weigh heavily on the Fed's decision in that meeting," says Sal Guatieri, senior economist at BMO Capital Markets. "This report takes on elevated significance."

The reason is that the jobs growth would confirm the view that the U.S. economy is recovering nicely and strong enough to withstand higher interest rates.

Here's the dilemma: the stock markets are extremely jittery right now because of concerns over China's economic slowdown and its effect globally.

So the Fed could raise rates on September 17 and potentially risk creating even more volatility in global stock markets.

Or the Fed can wait and hope -- with no guarantee -- that things will be calmer in a few months when it meets in December.

Experts are split. Some say a rate hike is coming in September while others say the Fed will wait.

"My sense is that the Fed will raise rates" in September, says Peter Boockvar, chief market analyst at the Lindsey Group.

However, others feel differently. Barclays economists say a rate hike won't come until March of 2016.

"September liftoff is pretty much off the table at this point," says Jesse Hurwitz, a Barclays economist.

Related: Is the Fed trapped now? Rate hike remains elusive

The uncertainty only adds significance to the jobs report on Friday.

If the jobs number is good tomorrow -- say north of 200,000 jobs -- it could clear the way for the Fed to justify a rate hike. If it's bad or mediocre, then the path to a rate hike become more clouded.

Recently, the U.S. economy has been performing pretty well while the global economy has slowed and international stock markets have taken a dive.

The Fed typically focuses on two key factors -- a good job market and steady inflation. The job market has kept up its momentum this year but inflation is nowhere near the 2% mark that the Fed likes.

Volatile stock markets can make the decision harder. Last week, New York Fed President William Dudley said a September rate hike was "less compelling" after all the market volatility in August. Other Fed officials aren't giving much clearer guidance one way or another.

A September rate hike seemed like a sure thing in July. Markets were overall okay and the economy was doing well. But the recent market volatility throws a September rate hike into question. The August jobs report coming out tomorrow could provide the answer.