The 10-year yield continued its upward movement this past week. In the chart below, please notice the red circle. That circle represents a breakthrough to a new high in the last two years. The “talking heads” are pointing to economies both here in the US and in Europe as improving. With the recent tax reform, the stock market has moved up greatly in anticipation of higher earnings. Not only are corporations being taxed at a much lower rate, but the new tax reform has made it much more attractive to bring funds back to US soil.
As more companies bring funds back to the US, this should encourage more investment domestically. These same companies (who previously offered low interest debt occasionally) will be able to strategically invest in the US. This, along with being more competitive in general due to the lower corporate tax rate, will continue to put upward pressure on interest rates.
As this is a real estate centric blog, let’s take a quick look at the effect on real estate values here in the SF Bay Area.
- Higher interest rates will mostly affect first-time home buyers.
- Some employers are already increasing bonuses due to tax reform. For those fortunate enough to be in this group, this could offset any interest rate increases.
- Until job growth stops here and/or housing units increase, the increase in values will continue.
It is far too early to really know the overall impact of the new tax reform. However, thus far the economy and the stock market seem to appreciate the perceived benefits.
That’s it for this week. As always, feel free to call me with any of your strategic financing needs.
Articles of Interest:
Business Insider reported “15 companies that are defying the retail meltdown by opening hundreds of new stores.”
The Washington Post reported “How to expand your real estate investing business into a new market.”
USA Today reported “Beyond Apple repatriation: 16 US corporate giants have $1 trillion in cash.”
|Apartments||4.130% – 4.715%||3 to 10 year (30 yr amortization)|
|Commercial||4.440% – 5.015%||3 to 10 year (25 yr amortization)|
|SBA Lending||Call for Options||Call for Options|