Signs were there that the Federal Reserve Board was not going to raise interest rates, KC Conway told NAIOP Arizona members at a recent Market Leaders Series.
Conway, a third-generation MAI and Counselor of Real Estate with SunTrust Bank in Atlanta, spoke to a standing-room only audience at the offices of Colliers International a day after the Fed cited risks from abroad and downward pressure on U.S. inflation from a high dollar as reasons to stand pat.
“When the Fed is about to do something, it is so telegraphed,” Conway said. “(Federal Reserve Chairman) Janet Yellen didn’t attend a conference in Jackson Hole. They usually get very vocal, but not this time around.”
Not even a volatile stock market, Conway said, could sway the Fed. He noted that during the recent, six-day period when the stock market began to plummet, market cap loss was estimated at $1.4 trillion. “You know what,” he said, “consumers are still doing OK. We seem to roll with the punches.”
The last time the Fed raised interest rates was in June 2006. Conway said the government is recreating all the bubbles of the past. But one area in which he says he sees strong yield is commercial real estate.
“Commercial real estate is an attractive asset,” he said.
Conway says when it comes to the government, it is too data dependent. Five economic indicators to which he subscribes:
>> ADP job data: “They track 24 million actual payrolls.”
>> Rail time indicators: “Everything that happens in North America moves from
the ports via the rails inland and back and forth.”
>> NAHB forecasts: “What did we learn from the housing crisis? That commercial
real estate follows the rooftops.”
>> The U-Haul index: “It shows who’s moving and to where.”
>> Kroll Bond Rating Agency: “It monitors what’s happening with CMBS loans.”
Conway wrapped up his discussion with the latest report from Moody’s Analytics.
“This is a favorable demographic,” Conway said. “Moody’s predicts that the Phoenix-Mesa-Scottsdale area will prove to be one of the strongest large metro areas in the coming year. That’s good for all of you.”