Beyond the Build

Construction Trends

The Federal Funds Rate…Up or Down

At the various real estate conventions I attend throughout the year, it seems one question is always being discussed: “When will the Feds raise rates?”

This week, I had lunch with a friend from the Federal Reserve, and as I understand, the question is now hinging between “When do we raise rates? ” and “Why shouldn’t we?”

The Federal Reserve watches the economy on several platforms, and we also discussed how realistic the current measurement standards are since GDP is only growing slightly above 2%. Many in the technology arena do not think they capture the efficiencies of technological improvements and time-saving apps occurring at an ever-accelerating rate.

While I am a builder and not an economist, a couple of thoughts:

  • We are seeing more equity chasing income-producing real estate developments for very low ROIs than there are projects out there. Small adjustments in rates will probably not significantly impact the industry. 
  • Of the consulting firms that we do business with who survived the financial crisis, many had to cut staff as much as 30 to 40% during the downturn. Earlier in this year, those same folks were telling me about their productivity. Revenue is back to pre-financial crisis levels, but with only incremental additional staffs. We are seeing the same thing.

What to do? As I shared with my friend, I worry about the things I can control. As for the rest I am just a horse rider.

{Image Credit} 

Merrill Stewart Jr.

Merrill Stewart is Founder and CEO of The Stewart/Perry Company, a commercial building contractor based in Birmingham.