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Nothing Bad Happened To CRE

In the real economy, nothing changed when the stock market and other markets tanked. Interest rates will rise this year for certain, but for those…

By Joel Ross | Updated on February 13, 2018

Joel Ross

In the real economy, nothing changed when the stock market and other markets tanked. Interest rates will rise this year for certain, but for those of us old enough to recall, 4.5% or 5% rates are still excellent. Many of us once believed 8%-9% was the norm and in the eighties it was considered good after the spikes in 1981 to 21%. If you cannot justify a deal at 5% or 6% rates, don’t do the deal.  It has too thin a margin.

Powell is known to economists and bankers as a sound guy, who is not a hawk and not a wild dove. He is pretty much a steady hand and will not suddenly go pushing rates a lot higher than what we all know will be three or at most four raises. We all know these raises are baked in, so you should long ago have been assuming a ten year at 3% -3.5% for this year, and maybe at 4% in 2019 in your models. While it is possible rates could move higher faster, that would only be the result of GDP growing at 4%, and that is a good news thing.

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