The Problems are the Path: FED calls interests rates Wednesday January 31
On Wednesday the FED will tell what the tendency is for lowering interest rates. If you readers just rely on CNBC, Bloomberg or some Social Media Site, I suggest you get on the St. Louis Federal Reserve Bank's mailing list. Add to the Wall Street Journal and the U.S. Census Department. With those three sources you will not find yourself being jerked around by Media promotions and investment banks and advisors promoting their positions.
The Wall Street Journal had a list of the four new members of the Federal Reserve Voting Panel. All four say too soon to cut rates. The Federal Reserve so indicted the same. The U.S. Census reports showed slight declines in inflation with nothing near 2% annual rates. The Census also stated POSITIVE growth in the US Economy. All quite good for high interest rates. It would appear to me why cut rates if the economy is doing so well? The next issue the FED Governors must be looking at are housing prices and rents. The Gen Z cannot afford homes per a local news media. California average homes are of $850,000. I take difference to that comment as I see my mentees selling homes in new developments to Gen Z'ers in new developments at a level of $650,000. With new developments creating competition it will sooner or later put pressure on Existing home sales.
Adding to the pressure of new home developments the supposedly Gray Tsunami of the Baby Boomers selling wave is sure to begin gaining momentum. Especially so, as the Home Mortgage rate drop.
There is one more item you would have learned from the Wall Street Journal before you found it on your You Tube site of Novices who promote themselves as "Influencers" seeking your subscription payment. The FED has a special program which will come to an end on March 11, 2024. The special program is providing a 5.5% rate to all banks and acceptable institutions' deposits with the FED. What has that program done? It has removed funds from Money Supply. As the deposits are locked up, banks no longer need to take risks with mortgages, consumer loans and business loans. Remember there are several trillion dollars in loans to large commercial projects that are coming due.
Commercial projects are not foreclosed upon. They either sell to another investor or the banks renegotiates the loan. If you believe the "World is Coming to an End" You Tube Influencer...DON"T. With the funds flowing back to the Banking System there will be funds to negotiate commercial loans.
Keep in mind China is in a recession and the property sector is collapsing developer by developer and taking state and local banks with them. The Bank of China cannot let that happen. If China won't let it happen do you think the FED will?
Zillow just issued their forecasts for real estate in the US HERE. It is quite interesting. Those areas which were once under pressure and saw double digit drops are forecasting 3-5% home price increases. Places like San Francisco are still in the negative forecasts and is most of Silicon valley. The Sacramento Valley area are forecasting increase in home prices, scant by increases.
Going back to the Census Reports, the New Home Sales
December 2023: +8.0* % Change
November 2023 (r): -9.0* % Change.
Not bad reading for those looking for a first time home with existing home sales frozen at new low inventories.
From the same Census report of January 25, 2024 high interest rates are not have a detrimental affect on the economy per this report: Advance Monthly Manufacturers' Shipments, Inventories, and Orders
December 2023: 0.0° % Change
November 2023 (r): +5.5° % Change
From the same rporting wholesdale inventories are showing confidence in the future in spite of high rates: Advance Wholesale Inventories
December 2023: +0.4* % Change in Inventories
November 2023 (r): -0.4* % Change in Inventories
The Consurer has confidence in spite of hiigh interest rates: Advance Retail Inventories
December 2023: +0.8 % Change in Inventories
November 2023 (r): +0.1* % Change in Inventories
Retail Inventories are up: Advance Retail Inventories
December 2023: +0.8 % Change in Inventories
November 2023 (r): +0.1* % Change in Inventories
Durable Goods remain strong: Advance Monthly Manufacturers' Shipments, Inventories, and Orders
December 2023: 0.0° % Change
November 2023 (r): +5.5° % Change
December 2023: +0.4* % Change in Inventories
November 2023 (r): -0.4* % Change in Inventories
We are buying less overseas: Advance U.S. International Trade in Goods
December 2023: 88.5° Billions of Dollars
November 2023: 89.3° Billions of Dollars
To summarize my position from the help of the US Census, Federal Reserve of Sta. Louis and the Wall Street Journal no cut in interest rates ahead.
This will give investors opportunities in the commercial small apartment sales area. Last month properties were being listed with 5.5% Cap Rates, today they are 6.72% Cap rates and up to 8%. My impression is the debt the small commercial projects have to contend with is a loan that will not and cannot be renegotiated.
I am in touch with numerous apartment rental projects that sellers are willing to negotiate. Some will finance the sale!
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