Fed leaves rates untouched – Translation?
Regarding yesterday’s Federal Reserve meeting, here is an excerpt from Goldman Sachs to help you build and manage your Real Estate empire going forward:
Link to Article at GS Asset Management
The Federal Reserve (Fed) left interest rates unchanged at the September meeting, citing recent global economic and financial developments that could restrain US economic activity and put further downward pressure on inflation.
- We view the Fed’s statement as dovish, lowering the odds of a rate hike in the near-term. The Fed focused on potential negative effects of global economic and market developments, and lowered its inflation forecasts. We view this as a dovish statement that potentially lowers the probability of a rate hike in the near-term. The market is pricing in roughly a 20% probability of a rate hike at the October meeting and a 50% probability of a hike by the December meeting, based on Fed Fund futures data as of 9/17. The timing will depend on developments in financial conditions and economic data, but we believe an October rate hike is now unlikely and the December meeting is a toss-up. We think this could dampen market volatility in the near-term, though uncertainty about Fed policy could lead to more volatility as the December meeting approaches.
What does this mean for you and your real estate investments? As a buyer, money is still “on sale” as mortgage rates continue to stay at historically low levels.
Put more simply, whether buying a $300,000 condo, an $800,000 house, or a $2,000,000 apartment building, your mortgage costs will most likely be lower now than after the Fed begins to raise rates. Call me today so we can begin building YOUR real estate empire!
Rising Rental Prices – Will it continue?
The Rent Also Rises (with sincere apologies to E. Hemingway)
“WHY YOUR RENT CHECK JUST KEEPS GOING UP” was the headline in CNN Money’s real estate special report last month, which could have explained to San Gabriel Valley renters why it is that U.S. rents keep rising faster than home values. After all, that doesn’t seem to make sense!
The list of reasons was long, and taken all together, fairly convincing:
- Millennials are renting longer
- Housing inventory is tight and getting tighter
- The housing crash scared those who would otherwise have become homeowners
- Baby Boomers are downsizing
- Rental construction slowed when confidence sank after the housing crisis
It all comes down to demand and supply—less of the latter, more of the former. Although the author may have exaggerated a detail or two (“…there just aren’t enough ‘For Rent’ signs to keep up with the demand”), more than one local renter will probably agree with the gist of the piece: rents have been on the rise long enough that it makes you want to think about the alternative: buying.
Some of the more extreme cases are urban: in San Francisco and Denver, for instance, renters have seen yearly increases of 15% and 11.6%, respectively, according to Zillow. Renters can find themselves in something of a bind, though—since those higher rent bills make saving for a down payment more difficult. It’s just one reason. Per CNN, “There are a bunch of things keeping renters on the sidelines, meaning “the folks that would be normally making the switch to become homeowners are still taking up the rental units.”
The result: more units remain occupied, vacancies go down; rentable units remain scarce…so prices renters pay continue to go up.
Will this Catch-22 situation persist forever? Most likely not: the broad economic news is that this year’s steady job growth coupled with the pronounced turnaround in builder confidence is likely to loosen the supply stranglehold. Last month, there was also the kind of news that can prompt builders to really get going: government data showed purchases of new U.S. homes surged (particularly in the Northeast and West), with sales of new homes soaring 24% so far in 2015. That’s the best showing since 2007.
Of course, before supply outstrips demand, the situation puts landlords in an advantageous position. Local investors who bought rentable properties during the downturn can now enjoy steady returns from their properties, or decide to sell in a robust market.
The next step for Monrovia? Many investors are taking a closer look at income properties within walking distance to the new Monrovia Gold Line stop. I am watching these properties carefully for the “great value” buy for my clients.