A graying population creates a liquidity trap, therefore expect sub-1 percent interest rates until 2030. That’s what Natalie Dolce at GlobeSt.com reports Ben Miller saying. Miller founded locally based real estate crowdfunding and investment platform, Fundrise. He said, “Every aging society in the world has seen an accompanying decline in interest rates. From Japan to the US to Western Europe, there is a consistent pattern: a graying population creates a liquidity trap.”
In each instance, Miller says, the government responds to an economic crisis by lowering interest rates and then “finds themselves quagmired in sluggish growth, diminishing labor participation, and near-zero inflation rates.”
At every investment or real estate conference I attend, I hear people say, “Interest rates have to go up.” At the beginning of each year, economists forecast rising interest rates. Yet, each year journalists and investment professionals are shocked to find they remain low… and even go down.
Demographics are destiny. As long as the US, Western Europe, and nearly every other developed nation is aging—reshaping the fundamental composition of our society—interest rates will remain inordinately, mind-bogglingly low.
In our Five Real Estate Trends for 2015, we quoted Mark Livingstone, a mortgage broker and president at Cornerstone First Financial in Washington, DC. He said he sees a prosperous 2015 ahead…The key factor? “Interest rates are going to stay low because of geopolitical unrest, and that will keep inflation in check, along with lower oil prices. That will translate into more buyers starting as soon as February.
Of course, our outlook on interest rates comes with no guarantee.
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