Top NYC broker Bob Knakal addresses the significant shift in interest rates and their impact on the real estate market and the economy.
Just a few years ago, interest rates were about a third of what they are today.
Now, many investors find it challenging to make deals work in this high-rate environment.
Knakal explains how the market had been lulled into a false sense of security with prolonged low interest rates.
Historically, the average 10-year yield over the past 50 years has been 5.4%, but recent rates have been lower. A return to ultra-low rates is unlikely unless a major global financial crisis occurs, which is not expected.
He critiques the Federal Reserve's interest rate policy, suggesting it was based on a misdiagnosis of economic issues.
The Fed assumed an overheated employment market, leading to a sharp rate increase. However, only about 20% of the U.S. economy is highly sensitive to interest rates, while sectors like healthcare and education continue unaffected.
Comparing today's situation to the housing bubble burst in 2006, Knakal notes that while low rates benefit real estate in the short term, they can cause long-term problems. Today's rates, though higher than recent years, are more in line with historical norms and what should be expected in a stable economy.
He concludes that while slight decreases in interest rates might occur, a substantial drop is unlikely. Adjusting to the new interest rate environment is crucial, as the period of exceptionally low rates was an anomaly rather than the norm.
Join this insightful discussion with Bob Knakal to better understand the current interest rate landscape and its broader implications for real estate and the economy.
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26 июн 2024
