There is some very good news coming from Washington regarding the banking industry. The Obama Administration has suggested that the Glass-Steagall Act, or at least some parts of the act, need to be reinstated. I believe it would be good for our country to once again limit the powers of the banking industry. As much as I hope to see this happen, it will be difficult for the current administration to accomplish this because of the power of the banking industry.
On the local front, housing prices in certain areas are on the increase. San Francisco home prices have increased each month for the past seven months. This is a very positive indication that our overall economy is beginning to improve. On a national level, home prices have been flat, which is a huge improvement over the steady decline we have been experiencing for oh so many months.
The Federal Reserve System is holding the federal funds interest rate in the range of zero to one-quarter of 1 percent. At the same time, the mortgage rates on home loans are being held artificially low because the Federal Reserve is in the process of purchasing $1.25 trillion dollars in agency mortgage-backed securities.
If you are feeling like you are not making much progress in the return you have been earning on your stock investments, you are right. The 2000’s have been the “lost decade” for the stock market. This is the first decade since the great depression of the 1930’s that the stock market has not gained value from one decade to the next.
In difficult times like we are now experiencing, people look for a secure place to put their money and a great deal of money has moved into bonds and the bond market. If interest rates begin to move up it will have a very negative impact on the bond market. I have heard the comment made, “we have a bond bubble.”
The most positive movement I see locally is the intensity of the residential real estate market in the entry-level price ranges. It is not difficult to find properties selling in less than 30 days, and many properties are selling in less than a week or two. In my view, this activity is a clear indication that people have money to spend if they think there is value in what they can purchase. It also means that people are beginning to have more confidence in our local economy. As people gain confidence they will once again be willing to spend money.
If you would like to have a detailed account of where our government has been since September of 2008, and in particular what took place at the Federal Reserve, get a copy of, “IN FED WE TRUST,” by David Wessel.
Jack Van Rossum C.C.I.M. is an independent real estate broker in Chico. He can be reached at 530-342-6915 or at jrossum@sbcglobal.net.
By Jack Van Rossum
