What will Mid-term Elections do to Interest Rates

Real Estate went up about 18% overall last year in our area and if absorption rates continue at current levels, we would have another 10-12% increases.

Absorption rate takes the monthly level of closings and divides it by the current inventory.  It's measuring, how long would it take, if the pace of sales continues at the current rate, to sell off all of the available inventory that exists today.  In Hoboken and downtown JC, absorption rates are less than around 1 month.  This is ridiculously low and is clearly a sellers market.
  
However, remember 'pigs get slaughtered'.  Inventory levels are creeping up.  Hoboken is up to a little over 180, downtown JC is up to about 137. These are both up from the beginning of the year.  Hoboken is up inventory about 35%, JC a little less.  

We are in the Spring market and buyers are out in force which is why despite the slightly higher inventory levels, absorption rates are still even lower than the beginning of the year.  

What will happen as we go into the Summer?  What will happen as we get to mid-term elections.  Will the volume of buyers ebb?  Will higher interest rates make some buyers drop out?  Will sellers start to say, 'Woulda, coulda, shoulda'?

It’s been an undeniably great year for US stocks.The S&P 500 is on track to cap off its best year in a decade after rising about 25%. And with just a couple of weeks left in the year, now is the time when strategists and analysts try to predict what lies ahead. But despite some bullish prognostications, there are reasons to think 2014 might be a bit more difficult.

There will, of course, be a new Fed chair at the helm. And yes, this new Fed chair,Janet Yellen, is poised to begin the much dreaded “taper,” that is, the process of reducing US government bonds the Fed automatically buys to keep a lid on long-term interest rates, currently set at $85 billion a month. When it comes, the taper could lead to an uptick in interest rates, which could affect corporate earnings and capital flowing into stocks.

But there’s another political economic event on the cards next year that poses arguably an even greater challenge to equity markets. 2014 is a mid-term election year, when the entire US House of Representatives and one third of the Senate will be up for re-election.

Analysis by Piper Jaffray shows that these mid-term election years, which come at the midway through the presidential cycle, are particularly volatile for stocks. Since 1930, the minimum peak-to-trough fall in US  stocks during a midterm year was a decline of 4.4% (which happened in 1954), Piper Jaffray says, while the median pullback has been 17%. (A market correction is officially defined as peak-to-trough decline of 20%).

​At the moment, the outcome of the 2014 midterm elections remains highly uncertain. Analysis by The Cook Political report suggests that as things stand, Republicans are likely to maintain control of the House, and Democrats are likely to maintain a slim majority in the Senate.  But a Congress totally controlled by Republicans is not out of the question. This would be a very different policymaking environment than one with split partisan control, which just goes to show how uncertain businesses must feel.

Information Provided by Donna Antonucci
Weichert Realtors
201-240-6832

donna@donnaantonucci.com
www.vrealia.com
www.propertyvalue.cc
www.HudsonRealEstateMonitor.com