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Federal Reserve Raises Interest Rates: Consumer Impact

 

As expected, the Federal Reserve raised the benchmark interest rate a quarter point, marking the eighth increase since December 2015 and third this year.  The federal funds rate, which serves as the baseline for multiple forms of consumer debt, now stands at 2.25%, up from 2% previously.  In addition, the Federal Open Market Committee projects one more rate hike before the end of the year, and three more in 2019.  This quarter point hike, along with indication of future rate hikes, reflects a booming economy, highlighted by a strong labor market.

 

Consumer Impact Areas

Credit Card Rates:  When the federal funds rate changes, the prime rate does as well, and credit card rates follow suit.  If possible, apply for a 0% APR transfer credit card to allow you to pay down debt interest-free.

Home Equity Lines of Credit (HELOC):  HELOC’s are tied directly to the prime rate.  As the federal funds rate increases, the prime rate follows.  Since HELOC’s are a variable rate, it will increase with each rate hike.  If possible, speak with your lender to see if a fixed rate option on the remaining balance is available.

Mortgage Rates: Mortgage rates are tied more directly to market forces specifically to the needs of bond investors.  In past rate hikes, mortgage rates have at times moved up and at other times they have moved down.  Mortgage rates, however, have been on a steady climb since the beginning of 2018.

Consumer Prices: Prices you pay at retail stores, gas stations, and the supermarket are directly impacted by a raise in the federal funds rate.  As the federal funds rate increases, the cost and availability of money decreases.  This will lessen the demand for goods and services, resulting in lower prices.

 

Sources:

https://cnb.cx/2xToFgx

http://bit.ly/2NJW3kB

https://fxn.ws/2OknHUQ

 

 

 

 

 


Forty Under 40 Awards 2018

Sep 27
4:17
PM
Category | General News

2018 Forty Under 40 Award

Our very own Sean Clark was recognized for this year's annual Forty Under 40 Award.

Here is a quick breakdown of Sean's portion of the program:

Achievements: Recognized as a "Young Gun" by Mortgage Professional America in 2014; named to MPA's Hot 100 list in 2014 and 2015; licensed in 24 states, with three more in progress; led Advisors in being recognized by NJBIZ as one of its Best Places to Work in New Jersey for the past six years in a row.

What drives you in your career? : "It's simple, three people... my wife, Pam, my daughter MacKenzie and my son Colton.

What was the best (business) advice you ever received? : "That old saying "It's just business" is just plain wrong! Advisors' president and my brother-in-law, Steven Meyer, taught me this in my early years at the firm. If you care as deeply about your company and your employees as we do, it's all personal and it's never "just business.""

 

To view photos from the event, be sure to click here.

To view the full program from the event and read more about Sean, navigate to the page by clicking here.


Positive Sign for Housing

The National Association of Home Builders conducts a survey gathering information based on the general economy and housing market conditions and compiles it into a report called the Housing Market Index.  Builders who are surveyed are also asked to rate the present sales of new homes, sales of new homes expected in the next six months, and traffic of prospective buyers in new homes.  For the month of September, home builder confidence is reported at a level of 67.  This number is in-line with estimates and last month’s release, but it is at a low for the year. When digging deeper in the report, we see that the traffic component is bringing down the average, but the current sales component, along with the future sales component are very strong.

A "housing start" is defined as the breaking of ground to construct a private, residential building.  The U.S. Census Bureau and the U.S. Department of Housing and Urban Development release a report breaking down new “starts” every month.  In August’s report, we see that housing starts rose 9.2%, which is amounts to about 1.28 million units.  This a positive sign for the housing market as it opens up room for more inventory which is created to help placate the continued healthy and hungry levels of demand.

Sources:

http://bit.ly/2IPQtu0

http://bit.ly/2PJktqY


30- Second Update – Strong August Jobs Report Supports Surging Economy

The results of August’s jobs report further supports that our economy is not only strong, but surging.  The United States created 201,000 new jobs in August, keeping the unemployment rate at an 18-year low of 3.9%.   The 201,000 new jobs were 10,000 more than what analysts expected.  The biggest news, however, came in the form of higher wage growth.  The yearly rate of pay increases climbed to 2.9% from 2.7%, representing the highest level since June 2009.  In addition, the average wage paid to American workers rose by 10 cents to $27.16 per hour.  Ward McCarthy, Chief Financial Economist at Jeffries, said wage growth is probably even better than it looks, since wages appear to be statistically depressed by the fact that higher-paid baby boomers are retiring and being replaced by lower-paid, younger workers.

Impact on Housing:

The August jobs report reflected an improved labor market and more confidence from both employers and workers.  The surprise jump in wages may be the final indicator for the Fed to green light its next interest rate hike.   Fed funds futures showed odds of a December hike at 58%, up from 52% before the jobs report.  Dallas Federal Reserve President Robert Kaplan believes there needs to be 3-4 interest rate hikes over the next 12 months to maintain steady economic growth.  Kaplan went on to say, “everything that’s in this job report today just causes me to reaffirm that view.”

Sources:

 

https://cnb.cx/2Odt6K9

https://fxn.ws/2QojDRR

 

https://on.mktw.net/2CPmIHP

 

 

 

 

 


Housing Market: Pending Home Sales Still Holding Strong

The Pending Home Sales Index is released monthly by the National Association of Realtors.  This index reports on the housing sector and breaks down pending sales of existing homes that have signed contracts.  Since this information is based on a signed contract, not a closed sale, it is seen as more of a forward-looking index.  With this latest release, for the month of July, we see Pending Home Sales cooling a bit across the nation by about 2.3% year over year, mostly due to a low level of inventory, but is still at a level of 106.2.  A level of 100 is the average level of Pending Home Sales so anything over 100 is seen as a positive indicator.  When digging deeper into the report, we also see that in many markets, pending sales are still increasing, but are just off their highs from last year.  The northeast and midwest showed gains for the month of July, but are slightly lower than where they were this time last year. 

Lawrence Yun, the National Association of Realtors’ Chief Economist has said, “it is important to note how much the housing market has recovered since the depths of the financial crisis.  Foreclosures sit near historic lows and record high home values have helped millions of households build substantial wealth.”  Lawrence also added that, “Rising inventory levels- especially if new home construction finally starts picking up, should slow the pace of appreciation to around 2-4% which will help first-time home buyers and be good for long-term health of the nation’s housing market.”

Sources: http://bit.ly/2MXS7f0


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