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