August 2011 – Market Report

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According to the June 2011 statistics from the Regional Multiple Listing Service (RMLS), the median sold price of homes sold in July 2011 climbed 2.20% as compared to June 2011. July’s increase in the median sold price is the fifth consecutive monthly increase. It is also the highest the median sold price has been since December 2010, when it was $230,000.

Pendings and Solds Both Up Year Over Year

The number of homes with an accepted offer remained steady in July 2011 as compared to June 2011 but jumped more than 33% as compared to a year ago.

Home sales slid in July 2011 as compared to June 2011 but showed a healthy increase of more than 13% as compared to July 2010.

Inventory continues to fall

In July 2011, the months supply of inventory under contract reached its lowest level since April 2010, when it was 5.8 months. Actual number of homes for sale on the last day of the month of July 2011 was the lowest in more than two years.

August 20, 2011 by ·

The Fed

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The Federal Reserve painted a much gloomier picture of the economy Tuesday, and indicated it would keep cash cheap and easy for at least two more years.

Following its fifth policymaking meeting of the year, the central bank also surprised Wall Street with several dramatic changes to its official statement.

Among those surprises were dissension among the ranks of the central bank, a “considerably slower” reading on the economy, and a bold statement that the Fed stands ready to enact further stimulus measures if needed.

Interest rates: The Fed indicated it plans to keep “exceptionally low” interest rates in place until at least mid-2013 as a way to continue to prop up the recovery.

The federal funds rate is the central bank’s key tool to spur the economy and a low rate is thought to encourage spending by making it cheaper to borrow money.

The Fed has kept the rate near zero since 2008, but has long been ambiguous on its future timeframe, saying it would keep the federal funds rate near zero for an “extended period.”

The new two-year time horizon was an unusual move because the Fed doesn’t typically signal its policies that far in advance, and because it was interpreted as an admission that the economy will remain weak until then.

“It surprised me that they boxed themselves into a corner that way,” said Professor Steve Wyatt from the Farmer School of Business at Miami University. “It essentially tells markets that they don’t see any hope that we will see a stronger economic recovery in the next two years.”

Dow soars 429 points in wild session

Disagreement within the Fed: Also surprising, was that three of the Fed’s 10 voting members formally dissented against using the new language. Multiple dissenting votes are rare among the Fed’s policy-making committee.

Regional Fed presidents Richard Fisher of Dallas, Narayana Kocherlakota of Minneapolis and Charles Plosser of Philadelphia said they would have preferred to keep the “extended period” phrase instead of laying out the 2013 timeframe.

“What it’s telling us is, this was a very divisive meeting and there was a lot of back and forth,” said Sherry Cooper, chief economist with BMO Financial Group and a former Fed economist.

Aside from some other gloomier language about the U.S. recovery, the Federal Reserve did little else in response to heightened fears about a global economic slowdown.

“This was a very conservative statement,” Cooper said. “Basically, they did the least they could do, short of doing absolutely nothing.”

America’s job crisis

Gloomy outlook: The central bank acknowledged that economic growth in the United States is “considerably slower” than expected. That marks a change from prior statements, when the Fed had said the recovery was chugging along at a “moderate pace.”

“Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected,” the official Fed statement said.

The Fed also acknowledged that thejob market has recently deteriorated, consumer spending has flattened out and the housing sector remains depressed.

More stimulus ahead? Critics have pointed out that there’s little the Fed can do to tame volatile financial markets after Standard & Poor’s downgraded the country’s credit rating Friday. Having exhausted most of its traditional tools, the Fed also has few remaining options to try to prop up the sluggish economy and job market, many say.

But the Fed indicated it is considering a “range of policy tools available to promote a stronger economic recovery,” and “is prepared to employ these tools as appropriate.” This language was much stronger than in June, when the Fed seemed to take a more passive stance, saying it would “monitor the economic outlook” and “act as needed.”

August 16, 2011 by ·