Will Interest Rates Come Down In 2024?

One last question for you. In your investment theses, you mentioned that you believe interest rates will come down. And I've always found interest rates very difficult to predict about the future. I'm curious why you believe they're going to come down.

Yeah, it is very, very difficult to predict and I can't tell you exactly when it's going to happen and I can't tell you exactly how much they're going to come down. My expectation is they will come down at some point between now and next year. So over the next 12 to 18 months we expect they'll come down. Our predictions are they're going to come down at least around the 5% borrowing rate. So today kind of you're in the low to mid sixes borrowing rates for at least the type of borrowing we do. So we do expect to see some growth. We're not saying they're going to come back into the low threes like we were at a couple of years ago, but I think there's a lot of reasons to expect they're going to come down. There's of course the argument that the government needs them to come down as the amount of borrowing that we have and the cost of servicing that debt. But I think the bigger thing is at some point it hasn't yet, which is why they haven't come down. At some point the high cost of borrowing and what that's doing and slowing development, slowing construction, slowing a lot of the economy down, slowing a lot of of investments, making debt inaccessible to a lot of companies, a lot of developers, a lot of the market, at some point it is going to restrict economic growth. It's surprising, I think, and stumping a lot of people to how well the economy seems to be doing despite the higher rate environment, which is why we haven't seen them come down yet. But at some point we're going to see rates come down. There's a lot of people think by the time election comes around that we'd be seeing them come down. Both parties, parties don't want a slowing economy and don't want to see a kind of high rate environment. But it's hard to predict. There's the arguments that if we have a real estate developer back in an office that is going to be pro real estate, which has been very much driven on rate environments over the last couple decade and a half, but hard to know exactly when. But I'll say I get the pleasure of sitting with a lot of economists and a lot of experts and a few different kind of groups. I'M in. And everybody has different expectations to how soon it's going to happen and how much. But the consensus is by the experts spent a lot of time studying this. They will come down probably going to take longer than a lot of us would have predicted a year ago. But we will see some decline here in the near future. And we're already seeing it. We have been seeing our borrowing rates from Fannie Mae and Freddie Mac steadily coming down, tightening the spreads, even though the the indexes haven't come down. So the spreads are tightening, but the indexes haven't come down yet. So we'll see. It'll be interesting. And for us, the way we think about it, if we're wrong and rates go up or don't come down and that leads to more distress and more challenges, which it will, that creates opportunity for us. Opportunity as a lender, opportunity as a buyer. So we're kind of prepared and ready for kind of what we can predict and model out as well as what we can't, such as the COVID environments of a few years ago.

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