Wednesday, February 3, 2016

The Fed's Interest Rate Increase - Predicting Impact on Real Estate


As a senior analyst at Ernst and Young (EY), Maxine Hepfer has been involved in the multi-national company’s market research since 2014. In fall 2015, EY submitted a well-received report, prepared by Maxine Hepfer’s team, predicting the consequences of an interest rate increase by the Federal Reserve. The rate increase did indeed take place on December 16, 2015. What were some of EY’s key conclusions?

EY anticipated a moderate rate increase that would result in minimal impact on commercial real estate investments. The actual rate increase was just 0.25%, proving the EY experts correct. EY also stated that commercial real estate would continue to be a worthwhile investment option because there was room for yield compression. The National Real Estate Investor organization confirms the likelihood of this prediction, in part due to U.S. market transparency and the ease with which foreign investors can input capital.

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