Bonds, Inflation, Stocks and Interest Rate News

According to the Federal Statement from yesterday, the economy is slowly but surely improving in most areas. Housing, however, is still struggling. If everything can continue to improve and grow stronger, it may cause interest rates to slowly climb. They also mentioned that inflation may increase because of higher energy prices, which is not good news for bonds. The Fed is putting pressure on selling Bonds still, especially now that most of the banks passed their strict financial stress tests. In the aftermath of this test, JP Morgan Chase actually decided to do a stock repurchasing program to boost its dividend. This had an effect on the overall stocks. Because of all this, we would recommend floating on new transactions as long as prices are above the 100-day moving average. If the bond falls below that point, we'd advise locking.

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Outlook for the Housing Market in 2012

As of December 2011, unemployment rates fell to their lowest level in three years with the addition of 200,000 jobs. This means good news overall for the real estate market since the country's economy is beginning to improve. This recovery is essential for the housing market and it is expected to continue throughout 2012. As we reported earlier, the Fed has announced that interest rates will not be raised until 2014 in the hopes of continuing in this economy recovery. The interest rates are currently at historic lows and are expected to stay that way to ensure a slow but steady rise by the end of the year. Therefore, taking out a mortgage is a very affordable thing at this time.

Predictions for the 2012 housing market include these continued low interest rates as well as the stabilization of home prices. This should lead to an increase in home sales: roughly 12% of existing homes and 74% of new homes; and there will also be a rise in inventory mostly due to increased foreclosures throughout the country. Distressed properties will make up about half of all home sales. There will also be an improved short-sale process so we can further avoid foreclosures. Homeownership rates are expected to continue to fall. Foreign and domestic investors will be likely to buy 25% of homes. And there will be an increased reliance on real estate agents in 2012. We will continue to report on these matters to see if these predictions pan out over the next year.

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