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Greenspan, Interest Rates
& Growing Your Business By John Tuccillo, Ph.D., CAE Word Count: 493 The
Fed has decided that this prosperity is too much for its taste and has embarked
on a campaign to stop it in its tracks. At the end of March, the Fed raised
rates for the third time (again increasing the discount rate by a quarter point)
and will likely repeat this twice more this year. Yet, despite the monetary
stringency, Alan Greenspan appears to be very bullish on the economy. In speech
after speech, he has praised the increasing productivity that has been generated
by the "new" technology economy. This seems a bit paradoxical. In
fact, Mr. Greenspan is attempting to walk a thin line, preserving the benefits
of change while keeping a bit of a lid on a roaring economy. The interest rate
increases by the Fed will do little to slow down the majority of the economy. If
your retirement account is growing by 10 or 20 or 30 percent because of the
boom, a mere quarter point increase in interest rates will affect you very
little. But the Fed is sending clear signals that it is not pleased with the
course of events and is making the symbolic moves it needs to retain
credibility. So
far, interest rate increases have not affected real estate. The monthly numbers
of existing home sales seem to be steaming along, oblivious to any turn of the
policy screw. And that's not likely to change. The demographics of the market
are such that there will continue to be strong demand from moving up baby
boomers, with techno-millionaires from Generation X close behind, buying houses
at earlier and earlier ages. This year shapes up to be another booming one for
real estate, regardless of what the Fed does. The long-term problem is and will continue to be inventory. Boomers are set in place for the next five years at least and rising demand will be matched by static supply. If you want to do something to improve your business this year and next, don't worry about sales. Instead spend all your time looking for listings. In this market, they're pure gold. |
