Our 2015 forecast is a bit later than usual but necessary so here it is. Once again our predictions for the year were incredibly accurate for 2014 as we predicted that the rates would come back down before year end and down they went! We predicted rate increase in 2014 and we were spot on about jobs and the Fed.
Before we jump into 2015, it’s only fitting that we thank all of you, our loyal clients for entrusting in us very important business decisions when selecting Empyrean Funding for your residential and commercial loans. We don’t take your confidence in us lightly and will continue to deliver trusted, reliable advice to you as our partners.

After a year in office, Janet Yellen has done what we expected and has changed the conversation from just jobs to jobs, inflation and the general overall health of the economy. Reductions in the unemployment rate due to an individual’s inability to find a job and ultimately leaving the work force isn’t an indication of a healthy economy. The labor force participation rate continues to be weak and isn’t showing real signs of getting significantly better any time soon. Add to the mix, the strength in the U.S. dollar and there will be further pressure on jobs as U.S. companies find it more difficult to sell their products.

Once again, going back to my forecast in 2013, deflation is a larger concern that inflation. I’m not suggesting that deflation will set in as that risk appears to have passed, but I don’t see any signs of real inflation that cause any concern. Even with rising housing and overall real estate prices most everything else is still cheaper today than it has been. Just look at oil.

Incredibly, all the “experts” will eventually be right when the Fed finally increases rates. While they have been predicting increases every year, I am going to hold strong to my position that even if the Fed increases rates a bit, it won’t have much of an impact on real rates. To be clear, I’m not suggesting that the Fed will raise rates this year but even if they finally did, I don’t see interest rates moving up significantly. Italian 10 year bond yields are at approximately 1.32. Why in the world should U.S. 10 year bonds be significantly higher? After all, is there any comparison between Italy and the U.S.? If anything, German rates are at .20% and Japan at .33%. While there are many other factors that will keep U.S. rates down, this one is very compelling.

I hope you enjoy this year’s forecast and I look forward to hearing some of your comments and as always, we are here to assist you on all of your commercial and residential real estate loan needs. Feel free to call or email us with any questions or concerns.