Real Estate Positioned for Strong 2015

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The year 2014 was lackluster for the real estate market. Prices, that were climbing at double digits in 2013, fizzled and the latest year-over-year price increase according to the Case Shiller Index was 4.5 percent. Additionally, the latest existing home sales figures tumbled 6.1 percent to a six-month low in November, the lowest level since May, after two straight months of strong increases. This is poised to change. Strong economic growth, the best job market in 15 years and the latest Washington FHA plan will boost the real estate market in 2015. The annual fees the FHA charges to guarantee mortgages will be cut by 0.5 percentage points, to 0.85 percent of the loan balance. Under this new premium structure, FHA estimates that 2 million borrowers will be able to save an average of $900 annually over the next three years if they purchase or refinance homes. First time home purchases and refinancing activity are expected to increase sharply after this plan takes effect at the end of January. Speaking of real estate, REITs were the best performing asset equity class last year. Global REITS returned 15.9 percent and US REITS returned 25.3 percent. Please follow a diversified portfolio of stocks and bonds on page 5 of the Global Perspectives book.

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