Your search results

Property Management – Sherman Oaks

SHERMAN OAKS PROPERTY MANAGEMENT

Fed Chair Says a Mouthful to Property Owners and Managers

On Tuesday July 15 Fed Chair Janet Yellen said more than Congress and most managers were anticipating. Her carefully prepared comments are a big insight into how those who control America’s monetary policies are thinking.

According to a report by USA Today Federal Reserve Chair Janet Yellen told Congress the economy is improving but still needs the central bank’s support, refusing to provide a specific timetable for raising short-term interest rates.

“There’s no formula or mechanical answer I can give you,” Yellen said when pressed by Sen. Mike Crapo, R-Idaho, ranking member of the Senate Banking Committee. She added, “The economic outlook is very uncertain.”

That is a plain spoken way of saying that the Fed needs to continue its accommodating monetary policies. This includes keeping interest rates low.

The benchmark 10-year Treasury bond yield fell to 2.54% which will lower mortgage rates in the weeks ahead. Now’s an auspicious times for property managers to remind their clients to refinance loans while rates are down and lenders are likely to have more funds to lend.

With inflation rising and the government’s unemployment rate falling some economists and lawmakers have suggested the Fed should prepare to raise its benchmark short-term interest rate sooner than planned.

Although the Fed is steadily eliminating its bond buying stimulus program, Fed policymakers have indicated only that they plan to be able to begin raising interest rates sometime in 2015.

Ms.Yellen said that several labor market indicators, like the share of the population in the workforce, remain low. She said the ranks of the long-term unemployed are still at “unprecedented levels historically.”

The Fed Chair also downplayed concerns about inflation, which has been picking up, but at 1.8%, remains below the Fed’s 2% target. Noting that wage gains are improving, she said they’re “not rising to the point where they can give way to inflation.”

No doubt about it, The Fed knows the economy still faces headwinds as a result of the Great Recession. Noting low productivity growth, Yellen told lawmakers: “We have seen false dawns” before.

As for the housing market, the Fed chair noted that the housing sector “has shown little recent progress.”

“While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year’s increase in mortgage rates, and readings this year have, overall, continued to be disappointing.”

While also speaking to the Senate Banking committee, Ms. Yellen set a powerful precedent.

She spoke directly about her concern over what Reuters reported as …stretched valuations in certain corners of the U.S. equity markets, including the small cap, biotechnology and social media sectors.

“The unusual comments from the Fed’s monetary policy report – the first time in 14 years that the Fed has commented specifically on valuation of a particular equity sector – that accompanied Fed Chair Janet Yellen’s semi-annual testimony to Congress, hit stocks in riskier sectors of the market” Reuters summated.

Yellen said in her remarks that valuations across equity markets remain generally in line with long-term averages, but the Fed’s report said the forward price-to-earnings multiples for smaller companies and those in the biotechnology and social media sectors appear “high relative to historical norms.”

My takeaway is that the Fed Chair wants to cool down the stock market while noting that the housing sector still requires sufficient stimulus. Look for home prices to move higher along with rent rates.

Posted by Marc Courtenay

Since 1946 the Carnahan name has had a reputation for honest and ethical Real Estate Property Management services in the San Fernando Valley, Santa Clarita Valley, Burbank/Glendale, Los Angeles, Westside and Conejo Valley areas.

The reason for our success is helping owners like you when they need it. Below is a partial list of property management services we provide to help you protect your real estate investment.