There are times where we throw caution to the wind and go “all in.” There are other times to pause and carefully ponder the realities of what may be “coming around the bend.” Perhaps, after nearly 8 years of low interest rates and endless economic stimulants, we are now in the “carefully ponder” stage of economic realities. Now is a good time for property managers to be cautious. With patience and keen observations come immediate results. It’s the power of doing almost nothing.
Recently we learned that the U.S. economy added only 151,000 jobs during August, giving the reluctant Fed justification to delay an interest rate hike until December. That’s the most likely scenario. This familiar posture for the Fed was exacerbated by the Chinese economic scare, plunging oil prices and spooked equity markets in early 2016. Then Brexit hit leading into the summer meetings and now the uncertainty of the upcoming U.S. elections.
“Lower-for-longer,” interest rates now look like “lower forever” unless the Federal Open Market Committee (FOMC) surprises and proceeds with normalizing monetary policy. This appears unlikely. Low interest rates benefit borrowers, including single-family rental investors. At today’s rates, investors will be able to leverage investment assets at historically low rates.
Meanwhile auto sales are turning south. After rising for 66 straight months, retail car sales have now fallen four out of the last six months. My sources say that this trend is likely to continue.
This and other factors suggest the making of a new economic trend and not just for the auto sector. The entire economy is beginning to show unmistakable signs of slowing.
When people are overwhelmed with financial uncertainty they buy fewer cars and take fewer vacations. They’re going to eat out less and cut back on noncritical spending and purchases.
In other words, the big drop-off in car sales could mean U.S. consumers are already cutting back. That’s probably why U.S. manufacturing is weakening as we begin the 4th quarter.
Last month, the Institute of Supply Management (ISM) reported that its Purchasing Managers’ Index fell from 52.6 in July to 49.6 in August. This index measures the strength of the U.S. manufacturing sector. When the index dips below 50, it signals recession. More importantly, the services and manufacturing sectors are now weakening at the same time. It’s significant that both indices would weaken so much at the same time.
The manufacturing index dropped to 49.4% from 52.6% in August and the ISM services metric slipped to 51.4% from 55.5%. The combined reading was also the weakest in six years. Look out below!
Now’s a good time to upgrade and streamline your property management business. Have the best most efficient technology and software available to navigate your operations.
Develop a “wait and see” strategy that takes into consideration the perspectives and preferences of your clients. Take the time to know what they are and invite their feedback now, not later.
Doing “almost nothing” incorporates prudence, calm and careful analysis. It doesn’t invite procrastination and should empower you to prioritize your work for the months and year ahead.
Reprinted with permission from PropertyManager.com. Marc Courtenay author.