News

Goldman Sachs’ predictions for 2018 aren’t completely good news for the commercial real estate market. Strong momentum is likely to boost wages and inflation more broadly, requiring the Federal Reserve to raise interest rates four times next year, Goldman Sachs Group Inc. economists said in a research note, as recently reported by Bloomberg. Higher interest rates will make borrowing more expensive and cause property values to grow at a much slower pace or, in some instances, to decrease. In my opinion, sellers seeking to maximize return on their investment should sell sooner rather than later. The window of opportunity to place a property on the market and secure the best deal may close fast in 2018.

According to the Bloomberg article, the New York-based investment banking and securities firm raised its growth outlook for 2018 to 2.5 percent and lowered its forecast for unemployment to 3.7 percent by the end of 2018, said Goldman chief economist Jan Hatzius. The U.S. jobless rate, which was 4.1 percent in October, may reach 3.5 percent in late 2019, Goldman predicted. That would be the lowest level since the late-1960s. Core inflation should accelerate in 2018, rising by about a half percentage point to 1.8 percent by year-end, Goldman projected.

The Fed has raised its target range for the federal funds rate four times since December 2015, and futures trading indicates another quarter percentage-point increase is likely again in December, at the final Federal Open Market Committee meeting for the year, according to the Bloomberg article.

In the world’s largest economy, the risk of a recession in the near term “still looks fairly limited,” the Goldman economists wrote. “But the strength is becoming ‘too much of a good thing’ and containing further overheating will become a more urgent priority in 2018 and beyond.”

Read Bloomberg article here