Where's the bottom?
I often get questions from clients like “How’s the market?”….”Is it a good time to buy?.....”How do I know when or where is the bottom is?’…..”What can I watch?”
These are all good questions. I personally watch 3 main economic indicators when making financial decisions. They are as follows:
Check the 3 month TED spread. This is the difference between the interest banks charge each other when borrowing from one another (known as LIBOR) and the 3-month treasury rate (T-Bill). The wider the spread, the more cautious banks are about their lending. Currently this number is at 3% which is far above historical levels. A number below 1% is considered a normalized credit market where banks are comfortable making loans. Go to www.Bankrate.com and search for Libor rate and 3- month T-Bill rate. Subtract T-Ball rate from the Libor rate.
Track Real Estate home inventory. The number of months of home inventory on the market has historically been a reliable predictor of home prices. A 6 month inventory supply is considered in balance. Anything above 6 months is generally considered a buyers market. Nationally inventories are around 13 months and locally in Austin current inventory is around 8 months. The National Association of Realtors posts this information around the 25th of each month and this can be found www.Realtor.org under research. For local Austin inventory levels by neighborhood call me! I am happy to share that information. 512.306.1001
Follow initial jobless claims. The number of NEW folks filing for unemployment benefits is released by the US Labor department each Thursday. Currently on a national basis we are running 475K – 535K a week. When that number starts to come down and then stabilizes below 400K that is a good indicator most of the pain could be over and the job market is rebounding. You can find the info on the home page of the Labor Department under statistics at www.dol.gov .
Now you know.