Yeah, who else tried to slug their way thru Thus Spoke Zarathustra back in their halcyon days? Now that the storms of autumn breath over my career, I find the pronouncements of Janet Yellen every bit as obtuse as Nietzsche.
I’ll try to make it simple. CNBC had an excellent piece this afternoon. If you borrow money, you’re going to pay more. If you invest in debt instruments, you’re not going to get paid more. Simple?
So what does this mean for real estate? I’ll posit a few axioms.
- If you have a home equity loan and a first mortgage, and you have positive equity, you need to rush to your friendly banker and refinance all that into a fixed rate loan before happy hour this evening.
- If you’ve been planning to buy a house with a loan (as most people do) then yesterday was the day. Today maybe. Tomorrow… eh…..
- If you can invest in rental property, look for “equity positive” locations. These are cities with solid economics, but the cost of construction is disconnected to the local rental rates. Existing rental houses sell for a discount to new construction. Buy all you can grab.
- There are three different explanations for the shape of the yield curve — rational expectations, debt stratification, and liquidity preference. Today, liquidity preference trumps the other three.
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