The Fed held its regular FOMC meetings this week and the result was essentially uneventful. There was no announcement of a rate increase and none was expected. But for future financing costs? It might be well into next year before we see Real Estate Investing theFed make its next move. Too much information is coming out indicating the economy is slowing once again and perilously close to negative growth. The advance estimate of Q1 GDP growth came in at 0.5%. Even the pessimists who expected growth to slow to 0.7% were wrong. GDP growth has fallen in successive quarters going back to the second quarter of last year. The last time we saw the economy contract was two years ago when Q1 notched a -0.9% reading.

 

The FOMC meets roughly every six weeks and holds sessions for two consecutive days. At the conclusion of the round of meetings, the FOMC releases a statement which purportedly explains the thinking behind closed doors. Part of the statement read, “Economic activity appears to have slowed” and “Growth in household spending has moderated…” When you look at the tepid 0.5% Q1 growth along with the Fed’s confirmation that economic activity indeed has declined it’s easy to think that any rate hikes won’t occur until next year. It’s certainly possible a rate increase would still happen this year but we’re already in Q2.

That means real estate investors and borrowing costs in general should stay in or near their current range. This has been something that’s been going on for years now since Freddie Mac reported the average 30 year fixed rate loan for a primary residence hovered around 3.35 percent in late 2012. That’s good news for the real estate industry especially at a time when real estate values are on a gradual climb.