You’ve read here recently that we expect interest rates for real estate investors to remain low well into 2017. And at least one FOMC member openly agrees with us. In a speech yesterday, James Bullard, the president of the Federal Reserve Bank of St. Louis as well as a voting member of the FOMC stated we could see low rates for at least two, maybe three years. That would keep financing costs for real estate investors low for an extended period both for purchase, development and refinancing existing real estate investor loans.

 

The overall economy, according to Bullard, is in a low-productivity growth environment. Employment numbers remain in a relative range and stocks have hovered in their current range for almost a year now. The last time the Fed intervened was in December of last year when they raised the Fed Funds rate, and subsequently the Discount Rate, by 0.25%, the first increase in nearly a decade. There are still some expectations of a rate increase by the end of the year but even after a 0.25% bump, interest rates overall will still be extremely low compared to historical data and look to remain so for some time. There really isn’t anything out there to convince investors that equities are the way to go and appear mostly to be in a holding pattern, looking for some signs of expansion.

Next week we’ll get the unemployment report and jobs numbers for October and some analysts are looking for somewhere near 250,000 new jobs. In August, once again, jobs numbers disappointed and instead of the 285,000 new non-farm payroll jobs we actually saw just 156,000, disappointing markets once again. We’re not convinced any substantial job creation will be reported for October but what we would like to see is improving wage gains. More money in consumer’s pockets typically sparks consumer spending. But so far, that too has been somewhat of an elusive expectation.