Last Wednesday, after a scheduled meeting of the Federal Open Market Committee, the Federal Reserve Board of Governors announced it will be maintaining interest rates at their current levels. The move likely signals a period of close observation by the Fed of current bull market economic trends and leaves the option open for a possible interest rate hike this upcoming June or December on signs that the economy is improving.
In the offices of Apartment Consultants Inc., news of maintained low interest rates means a potential silver-lining for current and potential investors. According to Keith Courtney, an owner of ACI with over 20 years of experience in real estate “continued low interest rates are good news for real estate investors to be able to maximize cash flow, make new investment purchases, and give property owners access to the equity in their buildings at a lower cost.” All of these potential investment opportunities further strengthen the economy, a trend the Fed is interested in seeing before it considers raising rates like it did in late 2015.
Courtney also notes that investors seeking to erase financial burdens on their investment can benefit greatly by taking advantage of a low interest rate period. “If an investment property owner has debt on their property, now is the time to refinance that debt to lock in these low interest rates for a longer term.” However, he also admits that anyone with real estate interest can benefit, even beyond minimizing owed debt. “For those investment property owners with no or low debt on their buildings, now is a great time to evaluate if they should put more low cost debt on their building and purchase another investment property, or make capital improvements and increase their rents.”
The Board of Governors noted that in addition to a strong economic outlook for job growth, the release also noted that inflation continues to track lower “partly reflecting earlier declines in energy prices and falling prices of non-energy imports.” In many ways, way the economy is moving feels different from years past, offering investors one of the longest periods of opportunity to invest. Keith Courtney of ACI continues to agree. “I have helped many clients improve their wealth through investing in real estate and I have never before seen a time with interest rates this low for this long” he enthusiastically explains, adding “I highly recommend for investors to evaluate their portfolio’s to determine if they can benefit from these low interest rates.”
In order to foster clarity in the murky business of economic uncertainty, the committee clarified that their actions were “consistent with its statutory mandate” adding, “The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen”. In an additional statement made after the meeting, the Federal Reserve noted that the public will be continually updated on how the current decision will affect monetary policy.
Although the decision was unsurprising to many, the ironclad announcement leaves little room to predict if rates will continue to maintain current levels throughout the rest of 2016. However, in a market where its bullish tendencies are being labeled the second longest in history and an ever economic landscape, it is very clear that only time will tell. Keith Courtney warns that history and data suggest that this boom of low rates is destined to end soon. “The long term trend will be for interest rates to move higher, so the question is when, not if.”
About the Author: Keith Courtney is a principal at Apartment Consultants Inc. with over 20 years of experience in real estate. Keith holds a special emphasis in the sale of apartment communities, condo conversions, triple-net, and tenant-in-common properties. Please feel free to contact Keith if you want a no obligation appraisal & evaluation of your property, or if you just have a general real estate question. Keith will always give you his honest opinion whether you should sell, or hold onto your property based on his experience owning and brokering investment properties. Contact Keith today at 619-725-3635 or keithcourtney@aciapartments.com.
