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Hi Greg, The IP should be the one issued by your router usually in the range 192.168.#.# but it seems that an ip address starting with 169.254.#.# is when there is no dhcp server running so the device assigns a local ip to itself. If you do a search for: linux ip starting with 169.254 there are a few discussions about it.
When it goes into hotspot mode it will generate a 169.254 ip along with the ip but it always disappears when the wifi network comes up. So for some reason your pi's dhcp server is not working right. I have tried various changes to the setup in the dhcpcd.conf file, adding config to /etc/network/interfaces file and enabling dnsmasq by default but have been unable to replicate your issue.

you could try sudo systemctl status dhcpcd and see if you get any errors.
also you can take out the line interface wlan0 in /etc/dhcpcd.conf it's not required but won't be causing the issue. Turns out to be a red herring in a development bug fix.

Have you installed any other software for networking that may be conflicting?

let me know if you make any progress and I will help where i can.