How long do we really think interest rates will stay down? It’s probably the most important question facing real estate players today. Low interest rates have allowed many borrowers to sidestep default or foreclosure and enabled refinancing at lower rates than original mortgages. In fact, low rates have allowed the industry to steer mostly clear of the cliff of hundreds of billions of dollars of commercial mortgages refinancing in an environment where many borrowers struggle with balances at or above property values.  Simply, they have prevented a debacle.

Of course, the Fed has been artificially keeping rates low at any cost (including killing investment prospects for many savers), because the economy has been so lackluster, and prospects for much improvement over current sluggish levels seem remote.

But can we depend on the Fed to maintain its pledge to keep rates low through 2014 when China and other primary buyers have backed off buying T-bills because returns are so low? As a result the primary market maker for T-bills is the Fed itself. At some point, its print money strategy to buy up its own bonds may hit the skids and it may need to back off the late 2014 marker its set down.

Few observers believe rents and property cash flows will increase enough to keep up with interest rate increases when they occur—rising cap rates would cause some value offsets and borrowers who have not locked in long-term low rates would see debt service increases. This might not be a happy story for investors who recently have been paying top dollar or borrowers sticking to current cheap adjustable rate mortgage schedules. Do you dare to tempt fate? Rates have been down so long that many players have become complacent, and when the complacency barometer borders on blas