The nights are getting cooler, but real estate activity is still HOT! We continue to see a strong purchase and refinance market as we head into the 4^th quarter of 2019. Talk of a recession has been floating around for some time now—are the economists accurate

Market News:

Recession

According to Ted C. Jones, Chief Economist with Stewart Title, the answer is “not anytime soon.” Recession is defined as two or more quarters of negative GDP (gross domestic product) growth. Here are some of the reasons he does not see a recession in the near future:

• The 2^nd quarter of 2019 showed a 2.1% growth rate.
• Retail sales (which account for approximately 68% of GDP) rose 7% in July on a seasonally adjusted rate, which was more than double the economists polled by MarketWatch.
• The number of people who shopped online and in-store Cyber Monday was up about 40% over 2017.
• Lightweight vehicle sales remained very strong in 2019 thus far.
• The unemployment rate is the lowest since 1969.
• 5% of workers feel confident that they could find a new job if they lost their current one.
• 30-year conventional interest rates are still very low.

The National Bureau of Economic Research, a non-government, non-partisan organization of academic economists, define a recession a bit differently: “The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” Why? Because it is “possible to have very small declines in real GDP for two quarters without the economy as a whole going into decline.” Therefore, it takes the NBER longer to declare that we are in a recession. Due to this, the NBER does not expect to issue a recession declaration prior to Election Day 2020.

Others predict a recession by the inversion of the yield curve between 10-year and two-year Treasuries. However, the inversion does not mean that a recession is imminent. The lead time can be up to 36 months after such before we are formally in a recession. Oxford Economics puts the odds of a recession in 2020 at 40%, which is a fairly significant odds percentage.

The bottom line: There will be a recession—that is something upon which we all can agree. As far as the timing of the next recession, that is much less certain. 

Interest rates

The Mortgage Bankers Association has forecasted average rates for a 30-year fixed mortgage at 3.7% in the last two quarters of 2019. This boosts the refinance forecast from 30% to 33% in 2019. It also predicts that economic growth will slow to 1.7% in the 4^th quarter, but consumer spending may increase by 2.7% and inflation should remain steady.

Latest Scam-Gift cards

Scammers have created a new gift card scam targeting realtors that involves fake emails from the National Association of Insurance Commissioners. The FTC, banks and gift card companies are warning consumers of this new scam.

Legal News and Case Law:  

There is pending legislation that affects real estate, including (but not limited to) the following:

• HB 4123 and HB 4699:  Authorizes a lien against all real estate throughout the state owned by an owner, of even a single blighted property that is subject to blight citations.
• SB 120: Creates a Michigan first-time homebuyer savings program.
• SB 253: Prohibits the use of a lawsuit to enforce a real estate commission agreement that is not in writing.
• SB 121: Provides for a tax deduction for contributions made to the first-time homebuyer program.
• HB 4050: Allows transfer of ownership from a general or limited partnership to certain individuals to be exempt from uncapping of tax assessment after transfer.