Rates are low ... and that's not all.On January 20, 1993, the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Times reported that "five of the nation's largest banks ... reported higher than expected earning ..." [and] " ... the end is in sight for the industry's trouble with real estate loans." Three of those banks, Citicorp, Chase, and Chemical are headquartered in New York. Is it any wonder why mortgage rates have now fallen to the lowest level in 20 years? Any banks lending money have been profiting from the extremely low rates paid on deposits (2 percent to 3 percent), verses the rates charged on loans. With reduced troubled real estate loans, as evidenced by Citicorp's $300 million reduction in loan loss reserve (New York Times, January 20, 1993), and a rally in the bond market, - mortgage rates had to fall. The Bond Market Let's take a closer look at this bond market rally. On March 8, 1993, the 30-year Treasury bond dropped low (NYT NYT New York Times NYT National Youth Theatre (UK) NYT New York Transit (New York, USA) NYT New York Tribune , March 13, 1993.) Accordingly, mortgage rates on solid, medium-sized, cash flow, commercial real estate had dropped to around 8 percent - the lowest in 20 years. In the February 20, 1991 issue of Real Estate Weekly, I advised real estate investors A real estate investor is someone who actively or passively invests in real estate. An active investor may buy a property, make repairs and/or improvements to the property, and sell it later for a profit. not to try to " ... time the bottom ... " with regard to interest rates. Well it looks like the bottom is here. Note that five days after the 30-year Treasury Note rally, prices for these securities" ... plunged ... " and the yields " ... leaped ... " to 6.86 percent, and then only 3 days later. ".... jumped ... " again to 6.89 percent (NYT, March 13 and 16, 1993). Now some of this fluctuation was caused by fear of that sometimes dreaded phenomenon inflation. Growth and Inflation During an early March 1993 radio show, Sonny son·ny n. pl. son·nies Used as a familiar form of address for a boy or young man. [Diminutive of son. Bloch, a best selling author and syndicated radio talk show host, exclaimed, "Inflation is back!!" He did not say for how long or how strong, so let's take a look at some recent statistics and economic fundamentals. During February 1993, the wholesale price index jumped 4 percent; the highest increase in two years. Although one month does not make a trend, Richard Rippe, chief economist The Chief Economist is a single position job class having primary responsibility for the development, coordination, and production of economic and financial analysis. It is distinguished from the other economist positions by the broader scope of responsibility encompassing the at Prudential Securities, commented that such a wholesale price increase "... is a classic sign of economic expansion ... " Also note that the national economy in the fourth quarter of 1992 grew at an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. rate of 3.8 percent, (Anything over 3 percent is considered significant by most economists.) The Action Plan I am not suggesting that interest rates are going to continue to rise exponentially or that the economy is booming. But keep in mind, these increases in growth and inflation come on the heals of staggering declines in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. real estate values. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the tax accessors's office, the city's real estate values declined 16 percent in 1991 to $303 billion and declined another $21 billion in 1992. So it's clear that appropriately priced commercial real estate is a great investment right now, because a) prices have declined, b) modest inflation and economic growth will increase real estate values over reasonable time periods, and c) the money is cheap! Low interest rates also indicate it's time It's Time was a successful political campaign run by the Australian Labor Party (ALP) under Gough Whitlam at the 1972 election in Australia. Campaigning on the perceived need for change after 23 years of conservative (Liberal Party of Australia) government, Labor put forward a to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. your commercial property. Availability is still difficult, yet selected lenders are increasing mortgage loan output because of the aforementioned improvement in bank earnings. Yes, interest rates are low, and that's not all! With modest inflation and growth, and recently depressed real estate values, it's time for the real estate investor to act. |
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