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Interest Rates and Inflation: A Mystery

Jack Harty, with Harty Mortgage Advisors, here in the Boise area, shares more of his wit concerning the prediction of interest rates and inflation.  It's always a good, yet humorous read.  Enjoy!

 

Janet Yellen said at her 9-20-17 press conference that the failure of inflation, in a healthy job market, to rise to the Fed's target rate is a "mystery".  As a consequence, predicting interest rates is a mystery.  In contrast, predicting past rates is highly accurate.

Where's inflation?  Economists have been looking for it under all the usual rocks, to no avail.

Photo:  Economic researcher doing research

It seems that the early September dip in interest rates was a short term phenomenon.  

While it did not raise short-term interest rates, the Federal Reserve announced after its meeting on 9/20/17 that it was going to sell some of the bonds it acquired during its post-Crash "accommodation".  That just added momentum to the upward trend in bond yields that we've seen for the past couple of weeks.  See graph following.

10 Yr T Bond Yields - Past Six Months

We are back up to the rate level the prevailed for much of the spring and summer.  While initially saber-rattling towards North Korea caused investors to move into the safety of bonds, now even threatening to annihilate North Korea has not caused investors to seek haven in bonds.  

The Fed said they do anticipate raising rates in the future.  Current guessing is in December...but those are just guesses.  The tool show below is as reliable a predictor of interest rates as any other used by commentators.

However, some cognoscenti prefer to predict rates with the following tool:

(The fellow stroking the ball is a member of the Cognoscenti family

Employment trends have been good.  

August National Unemployment rate at 4.4% (U3 measure) is at low Pre-Crash level.  The more indicative Unemployment Rate of 8.6% per the U6 measure, is also at a Pre-Crash level.

Relevant Idaho August Unemployment rates are at historic lows:

                                            Ada County 2.3%

                                            City of Boise 2.3%

                                            Boise/Nampa MSA 2.6%

                                            State of Idaho 2.9%

National Labor Force Participation Rate is at an virtual 40 year low (see graph).  Is that affecting labor supply and pricing?

                                    Labor Force Participation Rate:  1975 - 2017

Jack Harty

HARTY MORTGAGE ADVISORS

121 N. 9th St. - Ste 402

Boise ID 83702

Direct:  208 514 4766

Main:   208 344 4141

Email:  jharty@harty.biz


Tony Drost, President, First Rate Property Management, Inc.

Tony Drost, Chairman
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

09-21-2017
Tony Drost
Boise Area Real Estate Market
09-21-2017
Quarter 2 Vacancy Information

SW Idaho NARPM just released their 2nd quarter vacancy report for the Treasure Valley.  It is showing the average vacancy being at 3.5% which is still low compared to the last recorded national average which is at 7%.  Currently FRPM has a vacancy of 2.5%.  We are seeing the single family home vacancy going down from quarter 1 and the multi family has gone up slightly.  I feel that the time of year is the major factor in these changes from quarter 1.  Summer is a very popular time to move and all though it creates a slightly higher vacancy it is also the key time to get peak rents.  This report also shows that rents are still up and holding steady.  FRPM still considers this a win for investors because despite the slightly higher vacancy, properties are still getting pre-leased prior to tenant moving out and we are still getting great rent amounts. 

Read full report here: SW Idaho NARPM Quarter 2 Vacancy


Melissa Sharone

Melissa Sharone, President

First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

07-20-2017
Melissa Sharone
Boise Area Rental Market
07-20-2017
We're Calling it: Rental Market Softens

For weeks we've seen some signs that the rental market is softening to a more traditional rental market.  We're over a month away for SW Idaho's NARPM 2nd quarter rental market analysis report, but we suspect we'll see increased vacancies and lower rents.

We're seeing longer days on market which increases vacancy.  Rents are also being challenged and most landlords are opting to offer move-in credits over rent decreases.  Other than filling new construction, move-in-credits have been something in the past.  Move-in credits are the preferred approach as they protect the price point  for renewals and other similar units that were just rented months prior at the same or higher rent.  However, FRPM has done some testing and we are seeing a lower rent price point is converting better than the move-in specials.

For years Boise Landlords have been rewarded by being a bit aggressive with rents, but for the moment, FRPM is not recommending an aggressive approach.  This could change in a month or two, but for now, FRPM is recommending that Landlords focus on rents to reduce days-on-market and lost rent.


Tony Drost, President, First Rate Property Management, Inc.

Tony Drost, Chairman
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

06-10-2017
Tony Drost
Boise Area Rental Market
06-10-2017
Procedures for Inherited Tenants

Please take a moment to read the article that was recently published by Kristen Curtis in the residential resource.  It features the importance of having good solid lease procedures when taking on inherited tenants. Kristen has done a great job of implementing these procedures here at First Rate and it definitely helps the transition of gaining inherited tenants go much smoother.

A must for Inherited tenants- New Lease Procedures


Kristen Curtis

Kristen Curtis, Leasing Teaem leader
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

06-05-2017
Kristen Curtis
Property Management
06-05-2017
Swope Investment Properties Investor Newsletter

The most recent Swope Investment Properties Newsletter  has some great articles for property investors that I wanted to pass on to our blog readers.

Page One:  Stacy McBain provides a great summary of what to expect from the Ada County Assessor regarding value increases.  She also summarizes the process for appealing assessed property values as well as some of the factors used in assessing investment properties.

Page Two:  Eric Uhlenhoff describes how putting emphasis on "market" rents, could be the way to go due to a large disparity from actual rents to projected rents within MLS listings. So long as projected rents fall within market, this certainly is sound advice.

On the bottom of page two is an invitation to the AVID Investors Club.  This club has been growing and has proven to be a great resource for investors.  Members not only learn more about the real estate investment and rental market, but are also making great connections.  For example, an AVID member helps facilitate a hard money loan for a property owner.

Page Three:  I share an update to one of the metrics I track for Ada County 4 plexes showing how Gross Rent Multiplier has spiked and what this does to value.

Also on this page, Mary Nelson explains the advantage of working with a small brokerage who focuses on personal service.  I have worked the opposite side of real estate transactions where the other side is a team and I tend to view it as an assembly line process.  The product passes through several hands before final assembly, which works great when producing widgets.

To subscribe to these newsletters, please contact Shane Brown at brown.shane@me.com or 208-501-4000.


Tony Drost, President, First Rate Property Management, Inc.

Tony Drost, Chairman
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

05-23-2017
Tony Drost
Boise Area Real Estate Market
05-24-2017
FRPM 1st Quarter Vacancy

After posting the NARPM 1st quarter vacancy last week, we wanted to take a minute to share FRPM's 1st quarter vacancy results for 2017. 

The overall average for FRPM was .53%. This is for multifamily and single family homes.  This continues to be a record low for the past 5 years.  Below is a graph with the 1st quarter vacancy for 2013-2017. The orange line represents the vacancy for 2017. As you can see the trend of low vacancy is still going strong. 


Melissa Sharone

Melissa Sharone, President
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Property Rental markets in Boise and Idaho.

05-02-2017
Melissa Sharone
Boise Area Rental Market
05-02-2017
1st Quarter Vacancy Results

The SW Idaho Chapter of NARPM (National Association of Residential Property Managers) just released their 1st quarter vacancy survey . The overall average vacancy is 3.7% which is considerably lower than the last recorded national average of 6.9%. 

The results that are graphed below break down the vacancy between counties in SW Idaho as well as multifamily compared to single family.  As you can see the multifamily for Ada county is currently sitting at 5% and the single family at 2.5%.  For Canyon county the rates are at 2.9% for multifamily and 3.5% for single family.  We are starting to see the vacancy rise slightly due to the time of year but these results as well as FRPM's vacancy are still at almost a record low for the past 3 years.  These numbers are still allowing rents to increase, which is keeping the market strong. 

To read full report click here. NARPM 1st quarter 2017 vacancy survey


Melissa Sharone

Melissa Sharone, President
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Property Rental markets in Boise and Idaho.

04-25-2017
Melissa Sharone
Boise Area Rental Market
04-25-2017
Economist predict strong rental market

According to economists, the rental market will continue to grow and be strong for at least the next ten years.  The fastest growing segments of the US population (minorities, millennials, and singles) are choosing to rent.  Why?  Some point blame to the lack of consumer confidence following the crash of the real estate market. The amount of foreclosures depressed the home ownership rates.  Other contributors:

1.  Population segments that prefer to rent:

                - Minorities, which is the fastest growing segment of population

                -  Singles,  are fastest growing portion of households

                - Millennials, with high costs for advanced schooling, they are staying single and delaying homeownership

2.            Household growth:

                -  Long term:  We will add 13.6 million households by 2025 and an additionally 11.5 by 2035

                -  Minority growth rates higher than whites

                -  Advanced schooling and delayed marriage have delayed independence among young adults

                -  Millennials form 33 million household by 2035

3.            Homeownership rates

                -  Declined from 69.2% (2004)  to 63.7% (2015). 

                -  Declined from 69.3% to 58.5% for ages 25-44

                -   Projected to continue to decline with an average of 60.6% in year 2035

4.            Economic forecast

                -  Expect continuation of economic and employment growth with moderate interest rates and inflation

                -  Population changes and household formations should favor renting over home ownership into the near future.


Tony Drost, President, First Rate Property Management, Inc.

Tony Drost, Chairman
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

04-05-2017
Tony Drost
Boise Area Rental Market
04-06-2017
Are we building too many apartments- UPDATE

This information is an update from the blog that was posted yesterday. 

Over the past few years we have frequently discussed the concerns of the growing number of apartments being built in the Boise and surrounding areas.  Severally years ago we were really concerned that the supply would not meet the demand.  We were additionally concerned that the rising rents were not sustainable.  First Rate Property Management does not mange in Nampa, Caldwell, Kuna, Garden City, or Star, so we can't really don't feel comfortable forecasting in those cities.  In Boise and Meridian, however, the population growth, increased jobs, and higher wages have contributed to the demand to rent, which has kept up with the increase in supply and rents.

Below is an update on projects that have been completed, are in progress now, and in the planning stages.   That’s a lot of units.  We believe it will continue to be important to watch the vacancy and rent statistics for any trends. 


Tony Drost, President, First Rate Property Management, Inc.

Tony Drost, Chairman
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

03-14-2017
Boise Area Rental Market
03-14-2017
Vacancy Update

We just completed week 7 for our vacancy tracking in 2017 and things are looking great.  We are currently at a record low of .3% and the trend of low vacancy looks promising in the weeks to come.  The market continues to allow FRPM to raise rents with most renewals. The renewal increases are supporting even higher rent on a property that has been turned over.  FRPM is also keeping consistant with getting 90% of properties that are on notice re-rented with in 17 days, which is 13 days prior to them becing vacant.  The market continues to remain on the strong in the Boise Area. 

Our 2017 vacancy chart is below


Melissa Sharone

Melissa Sharone, President
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Property Rental markets in Boise and Idaho.

02-23-2017
Melissa Sharone
Boise Area Rental Market
02-24-2017

  • Boise Area Real Estate Market
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  • Boise and Idaho in the News
  • Deferred property maintenance
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  • Interest Rates and Inflation: A Mystery
  • Quarter 2 Vacancy Information
  • We're Calling it: Rental Market Softens
  • Procedures for Inherited Tenants
  • Swope Investment Properties Investor Newsletter
  • Tony Drost
  • Melissa Sharone
  • Kristen Curtis
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