Refinance commercial real estate now. At some time in the future interest rates will go up and the opportunity to lock in low rates will be lost.
Scottsdale, AZ -- (SBWIRE) -- 03/11/2013 -- Last Friday the Labor Department released the Employment Report for February. It was stronger than was expected. Job creations increased by 236,000, better than the 171,000 that was generally expected. The Unemployment Rate declined to 7.7%. There were some revisions to prior months, January down and December up. It was an improving report and there were cheers from Washington and from the financial press. The stock market continued to climb to new highs while the ten-year bond, the benchmark for commercial mortgage interest rates, increased several basis points in yield.
The record low interest rates that we have been enjoying are the result of an easy money policy from the Federal Reserve. Each month the FED has been purchasing $85 billion of securities. $40 billion of mortgage backed paper and $45 billion of US Treasuries. They have told us that they will continue this policy until the unemployment rate drops to 6.5% and while inflation remains at their 2% target. They have been pumping money into the financial system. The result is low interest costs.
The financial collapse that occurred in 2008 and 2009 is almost the same as the collapse that occurred in 1929 and 1930. That resulted in deflation and the depression of the 1930s. When the FED purchases Treasury securities and federally guaranteed mortgage backed securities it is like printing money. That is very inflationary. They have made the correct choice. The risk of future inflation is far better than to have deflation and a full blown depression. It is the FED pumping liquidity into the banking system and the economy that has kept the economy functioning. The liquidity has not yet caused commodity or wage inflation. The flood of liquidity has resulted in inflation in the stock market where prices are hitting new highs in spite of our weak economy. Housing prices have also benefited from the extra liquidity and the availability of mortgage funds.
When the Employment Report was released last Friday and indicated an improving economy, some people reacted to the fear that the FED was closer to reversing their monetary policy. That is not close yet. It will be quite some time before we begin to get close to the target of 6.5% unemployment. Also the economic negative of the sequester has not yet been felt.
Having explained the economy in simple terms you must get the very important message that at some time in the future the American economy will recover sufficiently to bring down unemployment and to begin to show accelerating inflation. That is when the FED will reverse the easy money policy. That will be the time when interest rates will go up very rapidly. It will also be the time when the stock market will top out, housing prices will top out and the declining cap rates of commercial properties will reverse.
We do not know when this will take place. It, however, will take place and interest rates will go up substantially. If you have properties that you can refinance at this time it is very prudent to do so. There is no question that interest rates will be higher in the years ahead and waiting can be dangerous. Take advantage of the low interest rates of today. Refinance any properties that you can. First Charter Financial can evaluate your properties and give you financing guidance.
About Victor Weintraub
Victor Weintraub, a noted economist and author, is president of First Charter Financial Corporation a leading independent mortgage company. First Charter conducts business on a nation wide basis and arranges financing for commercial properties throughout the US. The projects that are handle include office, retail, multifamily, hospitality and specialty properties. Loans amounts range from a minimum of one million dollars up to as large as 100 million dollars. First Charter maintains relationships with large and small insurance companies, retirement and investment funds, regional, national and multinational banks and is very active with capital markets funding sources. Contact First Charter Financial with all of your commercial mortgage needs. Email firstname.lastname@example.org Telephone(480)970 0990
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