The
predictions for 2017 are all over the board with regard to the economy and the
housing market in particular. While major variations always exist, this year the
predictions vary more widely because of two major factors. First, we have a new
administration being installed and we still don't know what policies will change
and how these new policies will affect the economy. We do know that a new
administration always promises change and we can anticipate these changes, but
it surely makes the prediction game more interesting. Secondly, interest rates
have been rising since the election. We don't know if these increases will hold
and whether they will continue. Even though rates continue to be historically
low, we don't know how higher rates will affect the economy in the long-run.
Certainly,
predicting the future is always a hit-or-miss game. For example, just about
everyone predicted higher rates for 2016. Even the Federal Reserve Board said
they anticipated raising short-term rates several times. Looking back, this
increase in rates never took place. Thus, if the Fed can't predict the future
even a few months out, then we don't expect that market analysts will fare much
better. Remember that there are always intervening variables that can affect the
future. These variables can and have included natural occurrences, political
events, the economics of foreign nations, or even instances of terror.
If
you look back at 2016, we had the Brexit event. But looking further back, we
have had intervening events such as a Tsunami, wars and many international
incidents of terrorism. While we hope that these types of events do not reoccur,
when dealing with an entire world of possibilities, we do know they are
possible. Thus, while many market analysts are making predictions such as higher
interest rates, a continuation of the stock rally and moderating housing growth,
we must understand that no one has a handle on the future. Higher rates and
moderating housing growth seem to be the consensus opinion, but there is always
wiggle room in the prediction game.
Mike Ervin
NMLS # 282715
mike@mikeervin.com
www.mikeervin.com
(650) 766-8500