![]() ![]() I also think smart economists at the Fed are making difficult decisions following an extraordinary couple of years. History shows that economies and markets move in cycles, so I believe the current trend is healthy in the long term. However, most people judge inflation by prices at the gas station and the grocery store, so inflation is genuine and painful until those prices trend lower.īut I remain an optimist. You may not have noticed, but early evidence shows inflation is starting to slow. The Fed is looking for a Goldilocks moment when its monetary policy is “just right” to create a soft landing for the economy. Don’t raise rates enough, and you won’t be able to restore price stability. Raise rates too much, and you may trigger a recession. Upon the news, investors initially seemed cheerful, but stock prices soon fell as the reality emerged that interest rates would continue to rise. Fed Chair Powell said that he expects rates to go up again at the July meeting and indicated that the Fed would take future decisions as they come. With consumer prices soaring, pushing short-term rates higher is the Fed’s attempt to slow economic growth and rein in inflation, all while attempting to avoid a recession. Last week, the Federal Reserve took an aggressive stance toward inflation by raising the key interest rate by three-quarters of a percentage point. You might even say that this is a "Goldilocks economy for commercial real estate" - not too cold, not too hot, but just about right.Searching for the Goldilocks Economy Provided by Marc Aarons And with all the drivers firing in the right direction and risks relatively tame, there's still a lot of road to run in this recovery. But for those of us in the property sector, this really is shaping up to be an outstanding expansion. In sum, it was not a smooth ride to recovery, and for many households, it still doesn't feel very good. ![]() Read More Another mortgage crisis is brewing Overall, the risk profile is more sanguine and the economic outlook more positive than it has been in many years. * How much longer can the recovery continue? The expansion already exceeds the post-WWII average.īut these negative risks are balanced by the benefits of lower energy prices and continued low interest rates, which provide important upside thrusts to the economy. The timing and market reaction are still to be determined. * End of the Federal Reserve's easy monetary policies. This seems a less immediate threat, though with potentially greater downside implications. dollar, both of which may limit our exports. This is now the biggest risk for the U.S., compounded by the surging U.S. Of course, our economy faces some risks, though compared to where we've been, the risks are rather benign. Read More Sticker shock stalls downsizing boomers Which means that we can expect several more good years for property markets, as the surging property demand translates into rising occupancy and rents for existing properties. The main reason: Despite recent gains in most sectors, both occupancy and rents remain well below prior peaks - and generally below the level required to support new construction. Construction is well below average rates and perhaps one-third to one-half of rates typical during expansion periods for all sectors except apartments - and even there, we are only now getting back to average rates. Meanwhile, despite the strong demand, supply remains quite tame by historical standards. Plus, the best years are yet to come for this rebound. * Credit markets remain benign, with interest rates and inflation both extremely low due to the slack in the labor and commodity markets, which is a great foundation for both business and financial investment.Īll of these factors are driving demand for all types of real estate, which means absorption is strong and growing for all sectors, even if it is below long-term averages, especially for a growth period. ![]() Read More This is what $1 million can buy you. All of which translates to more consumer spending. * Consumers, who make up more than two-thirds of the economy, are happy again because they're back at work, their debt levels are down and they've regained their wealth as home values and equity values are rising. There have been more jobs gains in 2014 than in any year this century. * Jobs are back past prior peak levels and growing sharply. Home sales, housing starts and pricing are rising in most markets. Read More How to buy a piece of Manhattan for $10,000Īll the key drivers for property demand are trending in the right direction: Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit ![]()
0 Comments
Leave a Reply. |