Over the past couple of weeks, I listened closely to a fascinating conversation between real estate investor Ken McElroy and investor and educator Tarl Yarber as they unpacked what is happening with inflation, interest rates, bond yields, and the broader economy right now.
What stood out to me as I listened was how closely these national economic conversations mirror what many buyers, sellers, investors, and families here in California are already feeling in real time.
There is a growing realization happening right now that the market environment many people became accustomed to over the last decade has fundamentally shifted.
One phrase from the discussion especially stood out:
“The Fed is not your business partner.”
That statement carries a tremendous amount of weight because for the last several years, many investors and consumers built expectations around the idea that interest rates would eventually fall quickly and return us to the ultra low rate environment we once experienced.
But the reality may be much more complicated than many hoped.
Why Inflation Still Matters
The conversation began with concerns surrounding inflation, particularly the Consumer Price Index, or CPI, which recently climbed to 3.8 percent.
Why does that matter so much?
Because the Federal Reserve watches inflation extremely closely. Historically, when inflation rises aggressively, the Fed tends to respond by increasing interest rates in an attempt to slow spending and cool the economy.
McElroy referenced what happened after inflation surged to 9.1 percent in June of 2022. The Fed responded with aggressive rate increases to combat inflationary pressures.
Now, with inflation beginning to tick upward again, investors are asking a new question:
Will rates really come down meaningfully anytime soon?
That uncertainty is reshaping decision making across real estate, lending, investing, and business planning.
I am also seeing many buyers and investors recalibrate expectations around affordability, payment sensitivity, and long term investment strategy as higher financing costs continue reshaping decision making throughout the Inland Empire and High Desert.
The Bond Market Is Sending Its Own Message
One of the more interesting parts of the discussion centered around the 10 year Treasury yield and bond market behavior.
While headlines and political narratives may suggest hopes for lower rates, the bond market appears to be signaling caution.
McElroy explained that the 10 year Treasury yield had climbed near some of its highest levels since 2007.
That matters because many forms of commercial debt, long term financing, and mortgage related lending are heavily influenced by the 10 year Treasury.
In other words, even if people hope rates will fall, the bond market itself may disagree.
And the bond market tends to have a very loud voice.
Inflation Changes More Than Prices
One of the most important themes from the conversation was not simply about higher prices at the grocery store or gas pump. It was about purchasing power.
McElroy shared a simple but powerful example involving his parents’ home and an old insurance policy. The house purchased decades ago for around ten thousand dollars is now worth hundreds of thousands of dollars, while the insurance policy stayed relatively flat because it was not adjusted for inflation.
The point was not that the homeowner was necessarily a brilliant investor.
The point was that inflation steadily changes the value of assets and the purchasing power of money over time.
Many people assume an asset simply “went up.” But in reality, part of what happened is that the dollar itself lost purchasing power over time.
That distinction matters tremendously because inflation quietly affects nearly every financial decision we make.
Why Investors Are Being Forced to Adapt
One of the strongest takeaways from the discussion was the idea that many investors can no longer rely on low interest rates to rescue weak deals or unsustainable business models.
McElroy explained how multifamily properties purchased during the low rate environment of 2020 and 2021 have been heavily repriced. In many cases, values have fallen thirty to forty percent because financing costs rose dramatically.
The properties themselves did not necessarily change.
The tenants did not disappear.
The buildings did not move.
But the cost of debt changed the entire equation.
As adjustable rate loans reset higher, mortgage payments climbed, cash flow disappeared, and many investors suddenly found themselves underwater.
Higher rates do not necessarily stop activity altogether, but they do tend to separate speculative decision making from sustainable long term strategy.
That reality has forced a shift in thinking.
The easy money environment that rewarded almost any purchase has changed. Today requires stronger operations, better underwriting, more creativity, and careful buying decisions.
A Bigger Lesson Beneath the Headlines
What I appreciated most about this conversation was that it was not built around panic. It was built around awareness.
Higher rates may remain longer than many expected.
Inflation may not retreat as quickly as people hoped.
And investors who succeed moving forward may be the ones who stop waiting for the Fed to solve their problems and instead focus on making wise, sustainable decisions in the environment that actually exists today.
That applies not only to large investors, but also to everyday homeowners, business owners, successor trustees managing inherited property, and families trying to navigate an uncertain economy.
In a Nutshell
The conversation between Ken McElroy and Tarl Yarber was a reminder that inflation, bond yields, and interest rates are deeply connected and continue to influence nearly every part of the economy.
The market environment has changed significantly from the ultra low rate years many people became accustomed to. Investors and consumers alike may need to adjust expectations, think more strategically, and build plans that work in today’s environment rather than hoping yesterday’s environment returns.
As McElroy put it so clearly:
The Fed is not your business partner.
Charlotte Volsch is a Probate and Trust Real Estate Specialist and Estate Property Advisor serving the Inland Empire and High Desert communities, including Apple Valley, Victorville, Hesperia, Rancho Cucamonga, and Redlands. She helps attorneys, personal representatives, successor trustees, and investors navigate real estate decisions during changing market conditions, probate transitions, and inherited property situations.