November 3, 2014

Here We Go

First off, its November 3rd, which is the 307th day of the year, meaning there are only 58 days remaining in 2014…. Not sure how that has happened, but more importantly, we enter the month of Thanksgiving, I wanted to say thank you. Thank you for the clients’ and referrals, support and friend ship.  It means more than you can imagine and more than I could ever adequately express here on an email update.

Here in Alabama, Residential Sales numbers are in for September in the Greater Alabama MLS and they confirm what we all thought. Sales & Prices are increasing while Inventory is down —

–          Total residential sales in September 2014 were 1,166 compared to 1,020 in September a year ago (14% increase)

–          Average price in September 2014 was $215,830 compared to $204,651 in September 2013 (5% increase)

–          Median price in September 2014 was $175,000 compared to $165,000 in September 2013 (6% increase)

–          Inventory totaled 7,099 for September 2014 compared to 7,788 in September 2013 (9% decrease)

Overall, it’s been an Interesting few weeks in the market on both sides of the aisle – Bond and Stock Markets… The first 15 days of October 2014 had all the trappings of a correction, if not the start of a bear market.  Those first 2 weeks resulted in a 5.5% drop (total return) in the S&P 500; 5 trading days with losses of at least 1%; and the looming end of 6 years of easy money provided by the Fed; both of which benefited our rates, as we saw rates at their lowest in a long time. But then stock valuations turned positive at the midpoint of the month and our rates started to increase gradually. .  The S&P 500 produced a gain of +8.4% in the 2nd half of October and finished the week with an all-time record on Halloween (10/31/14), its 35th record close this year.  The net result is a gain of +11.0% YTD with 2 months to go in 2014 (source: BTN Research).

We mentioned the end of easy money and that came with the very expected announcement from the Fed last Wednesday that after 6 years of “quantitative easing” (QE), the printing of new money used to purchase nearly $4 trillion of bonds is finally over.  It will be many years before all the unintended consequences of QE have been identified (both positive and negative), but there is little doubt that the original objective to keep interest rates low for a considerable period of time was accomplished.  It’s interesting to note, that Fed Chairman Ben Bernanke wrote an op-ed on 7/21/09 titled “The Fed’s Exit Strategy” in which he discussed ending the 8-month old “Quantitative Easing # 1” (QE1).  Bernanke wrote that “as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road.”  Few envisioned in July 2009 that QE would continue for another 5+ years (source: BTN Research).

If you have any questions, please don’t hesitate to call.