The Federal Reserve just released its October Beige Book summarizing economic conditions in the central bank’s twelve districts. The Beige Book is extremely important because it is one of the tools that the Fed uses when deliberating the timing of interest rate hikes. Favorable economic conditions increases the likelihood that the Federal Reserve will raise interest rates, while weaker economic conditions decreases this possibility. The Fed has kept interest rates at or near zero since 2008, and now the consensus opinion is that the Fed will raise them sometime next year, as long as the economy does not experience a dramatic setback before then. Before rates increase and the cost of capital increases with them, senior housing providers and investors who are seeking capital to acquire additional properties should contactCambridge Realty Capital to learn more about the many different financing options that it offers for acquisitions and other purposes.
Details from the Beige Book
According to October’s Beige Book, the economy grew at a modest to moderate pace during the period. Most Districts reported slight to moderate growth in consumer spending, which is important because consumer spending accounts for roughly two-thirds of the economy, and is often a reliable indicator of current economic conditions. The Districts that reported the most growth in consumer spending were Boston, Richmond, St. Louis, Minneapolis, Kansas City, Dallas, and Chicago. In additional good news, the Boston, Kansas City, Chicago, Philadelphia, Dallas, and San Francisco Districts are all bullish on retail sales from now through the end of the year.
In contrast to consumer spending, which grew in a number of Districts, the reports on residential real estate activity and construction growth were decidedly mixed. For example, while the New York District reported increased activity in multi-family construction, it also reported that the construction of single-family homes was slow in some areas. Also, although the Chicago District reported increased construction for both single and multi-family homes, it also reported a slight decrease in home sales, a slowdown in home prices, and a slowdown in residential rents as well. However, in contrast to mixed residential real estate reports, most of the Districts reported growth in commercial real estate activity and construction. For example, Richmond, San Francisco, and St. Louis all reported gains in either commercial construction, industrial construction, or both, Atlanta reported increased construction activity across multiple property types, and Kansas City reported a decrease in commercial vacancy rates and an increase in sales.
With respect to banking and finance, conditions in this sector continued to improve, with a number of Districts reporting net increases in loan volumes and increased demand for business credit. For example, demand for commercial mortgages increased in the New York region, and volumes for both commercial and industrial loans increased in the Philadelphia region.
As the economy continues to grow slowly but steadily, the drumbeat for the Federal Reserve to reduce its stimulus measures by raising interest rates for the first time in years will continue to grow as well. Before this happens, senior housing participants who wish to secure inexpensive capital for acquisitions, joint ventures, sale/leasebacks, or other purposes should continue to look to the Chicago-based firmCambridge Realty Capital for their financing needs.