Industry analysts and Fed-watchers are really having a rough time as of late. It seems sentiment makes a complete 180 almost daily as economic data and Fed comments sometimes run hand in Real Estate Investinghand and sometimes they’re completely opposite from one another. You recall the so-called “Brexit” calamity that created no shortage of uncertainty and hence investors were thinking there would be no way the Fed would raise rates this year. Later, GDP numbers for Q2 were announced and they were much lower than expected. Wall Street looked for production numbers closer to 2.4% growth but the number released came in at a surprisingly low 1.2%. Further, Q1 GDP was revised downward to 0.8%.

 

Yesterday however a gentleman by the name of Dennis Lockhart of the Atlanta Fed Board predicted Q3 GDP will come in a much higher 3.6% annualized rate.* According to recent data, housing starts hit a five-month high in July. That said, such strong growth would in fact indicate a rate increase, quite possibly next month, is in the cards. If Q3 GDP is confirmed it’s then also possible we’ll see yet another rate increase in December of this year. This is definitely not what we’ve been hearing so far this year and that a rate increase in 2016 is highly unlikely.

It’s also possible the numbers are not as accurate as predicted. All we need to do is look at GDP forecasts and actual numbers so far this year to understand that. Recall back in 2014 when Q1 and Q2 had a 5.2% swing from a negative -1.2 to 4.0. We haven’t seen any GDP report above 3.0% since early January of 2015 but if in fact we do see that number come in or even higher, we’ll see financing costs start to rise and when they do they won’t take very long to move.

*cnbc.com "Atlanta Fed Raises US 3rd Quarter GDP to 3.6%" August 16, 2016