Quick update: The 10 year Treasury (T10) climbed back up into the 2.60% range while the 10 year fixed apartment building loan we track moved up to 5.033%. The spread between them widened to 242bp but remains below the 2013 average of 265bp. This week we’ve added the darker green line to show the average spread between the T10 and the apartment rate on the chart. Note that it uses the Right Hand Scale along with the spread itself:
Back in March I posted a FRED chart that Bill McBride over at Calculated Risk shared tracking a set of data that pretty reliably coincides with recessions. Even better is that in almost fifty years of data there have been only two false positives which brings us to a very interesting point. First, here’s the chart as it appeared when I posted back in March:
Next let’s look in more detail at those false positives:
Yes the Fed is fighting DEflation but it sure doesn’t feel like deflation when we go to the store or pull up to the gas pump. While I am glad that Ben is battling the correct demon, it would be very helpful to know what ‘living inflation’ is doing to or for our apartment residents. Especially since on their National Apartment web conference earlier this week Reis said that in many of their largest 79 markets class B & C owners ability to raise rents has or soon will run into the 35% of income barrier. Watching what the costs of rent, food and beverages, energy and medical expenses are doing to our residents’ pocketbooks could guide us in raising rents. Today Pragmatic Capitalism had a very interesting piece on just that.