I know I just sent out only yesterday my latest edition of The Real Estate Philosopher -- and apologies for two articles in two days -- but after reading today’s Wall Street Journal, I had some additional thoughts on interest rates.
In my article of yesterday, I pointed out the illogic of interest rates being thought of as high when they are dramatically below the long-term average.
In the Wall Street Journal article, published this morning -- Back to the '90s? Jamie Dimon Raises the Prospect of 8% Interest Rates -- Jamie Dimon (CEO) is quoted by stating his concern that interest rates might shoot up to 8%, and said that he has prepared his bank for all eventualities by having the bank ready to weather a storm where rates drop as low as 2% or go as high as 8%.
In the same vein, from a macro point of view, I am sure many remember the old adage that real estate was supposed to be a “hedge against inflation.” But then as interest rates relentlessly dropped for 15-ish years many in the real estate industry I think forgot about the inflation hedge concept and instead became enamored with the tonic of making money based on these low interest rates. Now that rates are higher and maybe going higher, perhaps it is time to dust off that adage. Maybe higher rates – caused by inflation – make real estate the best asset class of all right now?
Best regards to all.
Bruce Stachenfeld aka The Real Estate Philosopher®