Greenwich Market Watch: What’s in Store

Speculation of when the Federal Reserve (FED) will change interest rates has returned. Volatility in emerging economies, global debt pressures, decreasing commodity prices and an increasing dollar have taken their toll on the financial markets. These developments are expected to affect the U.S. – decreasing the inflation rate and putting downward pressure on economic growth.

Economic and financial analysts contend that is not likely for the Fed to raise rates in March. What is expected to complicate the Fed’s interest rate decision? The different perspectives by the Fed, the Bank of Japan and the European Central Bank. As a result of these varying views, the dollar may weaken making it easier for global creditors to pay down their dollar-based debt. This, in turn, would improve the markets causing the Fed to raise rates in March. This would be made more likely if the U.S. economic data appears to have improved to support the rise in interest rates. The Fed, however, has already indicated that economic data would not support an increase in interest rates. Last year, the Fed indicated their rate decisions would be depending on economic data.

Recently reported, the U.S. Consumer Price Index (CPI) decreased 3.9% in December. Housing starts decreased 2.5%, but the seasonally adjusted rate remains above one million.

Connecticut Realtors® reported last week single-family residential home sales in Connecticut increased approximately 11% when comparing December 2015 to December 2014. The median sales price decreased 1.2%. Relative to townhouses and condominium sales in Connecticut, they decreased almost 8% when comparing December 2015 to December 2014. The median sales price decreased 6.2%.

The National Association of Realtors® statistics released last week reported total national home sales (all types) increased approximately 8% when comparing December 2015 to December 2014; and the median national home sales price is $224,100.

In the Northeast, home sales increased almost 12% when comparing December 2015 to December 2014 with a median sales price of $255,700.

Lastly, Pew Research reported that more adults between 18 and 34 years of age are living with their parents than ever recorded. Millennials who have left their parent’s home are preferring to rent than to buy. This explains why U.S. homeownership is at 48-year low.  As job prospects and wages increase, it is anticipated that millennials will buy more homes.

Student debt is adversely affecting millennials ability to purchase a home. Home values have been increasing 4 to 5% from the comparable period last year. Homeowners are seeing the benefits of appreciation more than twice the rate of inflation. Millennials are also finding it difficult to come up with a 20% down payment as home values are rising.

Buyers should commit to a purchase sooner than later. Case in point, should 30-year mortgage rates increase by a percentage point a year from now and home prices increase by another 5%, monthly mortgage payments could increase approximately 18%.

Mary Ann Clark is a realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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