The world waited with anticipation as all experts predicted a rate increase is imminent. As I expected, the Fed didn’t raise rates. In fact, the statement they put out afterwards suggests we may not see a rate increase for some time to come. Earlier this year I said the first quarter of 2016 would be the earliest, now I think the Fed will stay indecisive far beyond that date and we may not see an increase until late 2016 and perhaps not till 2017. Inflation was to blame for kicking the can down the road. The current inflation reading is nowhere near the Feds target, thus the decision to leave rates unchanged. The real issue, as I see it is that inflation may not come around for some time to come as prices across the world continue to decline for most items as a result of a slower economy and much more efficient systems due to advancements in technology. With the decision to leave rates unchanged, cheap money continues to be abundant. Lenders are getting more aggressive with their underwriting as rates stay extremely low. In a recent transaction we refinanced a newly stabilized apartment building pulling out all of the equity investment in the property for our client. Given the recent rent increases and majority of the tenants being new, the challenge was to convince the lender that there had been a lot of work done to the property and the new valuation was justified even if the borrower had no cash equity in the transaction post closing! As always, a detailed analysis of your specific situation is the best way to determine what the most suitable loan is for your property. The wrong loan even at a very competitive rate is far worse than the right loan at the right rate!
This morning’s jobs report showed 173,000 jobs created in August. Well below the 217K expected. Unemployment rate drops to 5.1%. While I still don’t think the Fed will raise rates in September, I wish they would do it and get it over with already and then step aside for a while.
Transaction of the month: $3MM cash out on an owner occupied residence that was just completed. Borrower attempted to secure the loan with their own relationships and was unable to get is approved because of the recent completion and amount of cash out. We stepped in and closed within 45 days.
Have a great labor day!