And might be a substantively good speech as long as it's left ambiguous what 'interest rates' means. If that means the Fed Funds rate it's highly likely (nothing about the future is certain) that rate declines in coming months starting with the Fed meeting Sep 17-18. The Fed has said so. See examples as for the June 2024 meeting, for example the dot graphs on pg.4. And subsequent public statements have been more 'dovish' along with somewhat weaker economic numbers.This is the type of speech they expect you to give:
It’s a pleasure to be among such a distinguished group of professionals who, like me, have dedicated their lives to navigating the intricate landscape of real estate. Today, I want to discuss into a topic that has been top of mind for all of us: interest rates. Specifically, I’d like to share my perspective on why I believe interest rates will likely decline next year and why predicting their trajectory is a complex and often frustrating endeavor.
Before we dive into the specifics, let’s take a moment to acknowledge the undeniable impact of interest rates on our industry. They’re the invisible hand that shapes the market, determining affordability, demand, and ultimately, the trajectory of property values. When rates rise, the cost of borrowing increases, making it more expensive to purchase a home.
So, why do I believe that interest rates will likely decline next year? Let’s explore several key factors that support this prediction:
https://www.federalreserve.gov/monetary ... 240612.pdf
IOW the Funds rate is nowadays* somewhat predictable in the fairly short term. But term rates aren't and those are much more important to (residential especially) RE market. The prototype speech IMO goes a bit off track there, if aiming for validity, by saying "[w]hen rates rise, the cost of borrowing increases, making it more expensive to purchase a home." That strongly implies the speaker is talking about the 30 yr mortgage rate, the predominant way of financing owner/occupier SFH's. It's a crap shoot whether that goes up or down from here. Although you did say 'the speech they expect you to give' (you didn't say 'highly valid speech'). And there should be a roughly even money chance of being right saying it will go down; add in cases where it goes up for reasons you can say 'nobody predicted!' and there's a pretty good chance it doesn't look dumb in retrospect to say the 30 yr M will go down. But I'm assuming you know the list of 4 reasons 'rates' will go down are known by the market and already factored into the 30 yr M rate now. And the difference between spot and 6 mo or 1 yr forward 18 yr rate (~the avg life of 30 yr M) is small to negligible.
*this isn't an unchanging feature of human and market nature. Prior to 1994 the Fed didn't even announce Fed Funds rate changes per se *when they happened*. The market just learned of Fed Open Market transactions (repo's, reverse repo's) and the Funds rate would settle where it settled. No statement, no press conference. It's very different now, as transparency has evolved from disclosing FF rate changes in real time, to the statements and press conferences (with forward looking elements) and in recent years additions like those dot graphs of members' expectations of future FF moves, plus heavy telegraphing in public speeches/remarks in between meetings of upcoming changes. The conscious idea now is not to take the market by surprise w/ FF rate changes any more than necessary.
Statistics: Posted by JackoC — Sun Sep 08, 2024 10:01 pm — Replies 25 — Views 1529
