Welcome to the New "New Normal"December 22, 2015
| John Salustri
So, did you have fun? I mean, since 2006? That was the last time the Feds raised interest rates until this past month. The rate hike, by a whopping quarter of a percent, won’t impact your pocket book, but it does end the years of rather comical speculation of pundits that “this year” (plug in any year since ’06) would be the year when they raised them.
Of course, while the numbers themselves are relatively insignificant, they do cross what Marcus & Millichap calls a psychological threshold. Of course, this is good news. For now. As M&M states: “With the quarter-point increase of its overnight lending rate, the Fed signaled that the economy has finally returned to normal operating levels.”
And the firm sees it benefiting commercial real estate investors,
“more because of the message it conveys than the influence of the rate change itself. By raising the rate for the first time since 2006, the Fed has finally expressed its confidence in economic growth, potentially opening the door to increased consumption and business investment. These positive trends would benefit all commercial real estate sectors as household formations escalate and increased discretionary income supports demand for housing, retail goods and business services.”
This is the common wisdom, and the small uptick allows the Fed to watch how the markets respond, and it holds in its hand the ability to back off of any further rate hikes, anticipated to be one point per year. At some point we’ll begin to feel that. As Steven Kohn of Cushman & Wakefield recently told GlobeSt.com, “After three years, that becomes somewhat meaningful.”
Of course that’s a way off. For mow we can all enjoy working in this latest version of the “New Normal,” and trust the Fed to continue to do the right thing. What can possibly go wrong there?
About the Author
John Salustri is one of the nation’s most respected writers in the field of Commercial Real Estate. A multiple award winner for excellence in journalism, John is the founding editor of GlobeSt.com, the nation’s premier news and information site for the commercial real estate industry. Today John is a freelance writer and editor, focusing on helping companies boost their industry presence through enhanced web and print content.