Sunday, January 25, 2015
The U.S. housing market closed out 2014 on a high note with increased sales of both new and existing homes, as 5.04 million homes sold to new owners. The 2013 spike in home values finally slowed down enough last year to keep prices in affordable range for buyers with relatively stagnant incomes.
In addition, global economic pressures have encouraged more purchases of bonds and treasuries, which keeps mortgage rates lower and buying homes cheaper. While the U.S. stock market has floundered in early 2015, investing in bonds is considered a "safer haven" to place funds.
One of the biggest problems for the housing market remains weak participation from first-time home buyers. This demographic represented only 29 percent of the market in December 2014, significantly lower than the 40 percent ratio deemed healthy for growth.
Millennials have moved to urban centers in droves to start their careers, also burdened with massive student loan debt and not enough assets for down payments. As long as this trend continues, interest rates could stay near historic lows, making refinancing more attractive and home buying more affordable.
Saturday, January 17, 2015
The cost of oil is still dropping but halted at just under $49 a barrel by the week's end. Friday's plateau finally caused the stock market to pick up again after four straight days of losses.
This unforeseen oil drop has confounded market analysts and spurred a wide range of reactionary effects: saving the average consumer money, yes, but also spelling job cuts within the industry.
The most obvious effect of the lower cost of gas is extra savings in transportation costs, as well as energy savings for gas-heated homes and businesses. Definitely a win for the average citizen.
On the other side of the coin are the inevitable layoffs for companies dependent on oil production. With lower demand and profits, plenty of jobs will disappear, including 9,000 this week at international oil company Schlumberger.
Looking at the bigger picture, markets are spooked by the drastic dropoff. Just seven months ago, the cost of an oil barrel was more than double today's price at $115 per barrel. The dropoff in gas prices represent part of December's 0.4 percent overall consumer price slide.
This deflationary trend is the exact opposite of what the Federal Reserve is looking for before it will start to raise interest rates again. Slow, modest inflation rates are generally associated with strengthening economic trends. Current conditions are leading to more investment in gold and bonds rather than stocks - a good sign for interest rates remaining low.
Saturday, January 10, 2015
Crude oil prices through late 2014. This week, prices dropped to under $50 per barrel.
As we enter 2015, things are looking up economically for most Americans. Unemployment rates have dipped down to 5.6 percent and the December 2014 jobs report shows more than 250,000 new jobs added to payrolls. The jobs report reflects 12 straight months of strong job growth for 2014, the best streak since 1999.
In other news, gas prices continue dropping lower. Money saved at the gas pump translates to more flexible spending cash for Americans to spend elsewhere, a good sign for retail and tourism. On the flip side, however, Wall Street investors are getting nervous that as supply finally surpasses demand, the U.S. oil boom could wither away and take jobs with it.
On account of these conflicting economic themes, the Dow Jones industrial average and Nasdaq slipped on Friday following a couple days of gains. Another concern remains a lack of solid wage growth to match rising employment.
With all of these issues in mind, Federal Reserve officials have stated that interest rates should stay at low levels for the foreseeable future, which is intended to further boost the economy. Another way to put more cash back in your pocket? Take advantage of extremely low interest rates by refinancing your mortgage. You never know when low rates will be here today, gone tomorrow with new economic data.