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Economic Update: August 2017

Economic Update - Opes Advisors

 

Rate increases on hold, stocks pull back after long rally, California may eliminate homeowner tax break

 

Rates: weak inflation may take increases off table for now

At their meeting this month, the Fed indicated weak inflation numbers may cause them to push further rate increases out until late this year or into 2018.

 

A recent Wall Street Journal poll showed that most economists don’t expect another increase until this December. While the Fed has consistently stated its intent to raise rates gradually over the next couple of years, analysts don’t expect a dramatic increase in the foreseeable future. In an interview with CNN last week, San Francisco Federal Reserve President John Williams said, “The new normal is much lower than we’ve seen in the past.”

 

Stock markets: uncertainty puts recent gains on “pause”

Weak corporate earnings reports caused concern among investors and resulted in several days of downturns, particularly in the tech sector. The economy is still growing steadily, and unemployment is at a 6-year low.

 

Is now the time to cash in on stock market gains?

Even with its recent setbacks, the Dow has seen a sharp rise over the last six months during another bull run—up nearly 4,000 points since November. Consider taking advantage of this opportunity to buy the second home you’ve been dreaming of, or pick up an investment property to diversify your assets. We have the broad selection of flexible financing solutions you need to expand your real estate portfolio.

California AB 71 would eliminate tax deductions for second homes

State legislators are looking for funding sources to help pay for affordable housing and help alleviate California’s housing crisis. A proposed bill, AB 71, would eliminate the deductions. The law would apply only to Californians who spend a significant amount of time in their second homes (not rentals, defined by the IRS as properties where owners spend “less than 10% of their time). In other words, AB 71 targets those wealthy enough to afford a second house and not use it primarily for rental income.

 

The Franchise Tax Board estimates 195,000 homeowners would be affected by AB 71. The change would cost these second homeowners, on average, about $1,140 annually, in addition to the sizable tax breaks they receive at the federal level on both their properties.

 

While Opes Advisors, a division of Flagstar Bank, Member FDIC, uses all reasonable efforts to ensure that this information is current, accurate and complete on the date of publication, no representations or warranties are made (express or implied) as to the reliability, accuracy or completeness of such information. Opes Advisors, a division of Flagstar Bank, Member FDIC, therefore, cannot be held liable for any loss arising or indirectly from the use of, or any action taken in reliance on, any information appearing in this email.