Billionaire Barry Sternlicht has criticized the Federal Reserve for wreaking havoc on the real estate market with aggressive interest rate hikes.
Sternlicht, chairman and CEO of global real estate investment firm Starwood Capital Group, cited falling rent prices across the United States and said the Fed was overstating inflation and damaging real estate. I think it is giving.
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“We were minding our own business,” Sternlicht said in an interview on “In Depth with Graham Bensinger.”Normally, we're the ones who messed up the global economy, the real estate industry.The Great Financial Crisis. “We're overbuilding the housing market like we did in 2016.”
“That wasn't the case this time. We were just collateral damage.”
Sternlicht says Fed uses 'esoteric' tools
Sternlicht pointed to the still-strong job market and called interest rate hikes “difficult and inappropriate” for the current economy.
But he also acknowledged that the Fed has no other tools to fight inflation.
“I've been through five or six crises, and I think this one is the worst,” he said.
The Fed could start lowering its key interest rates as early as June, but Fed Chairman Jerome Powell has stressed that everything depends on future data.
Conflicting rent data
Sternlicht criticized the Fed's methodology for measuring inflation in the housing market, accusing it of using rent data from about a year ago, even though rent prices were skyrocketing in December 2021. It reminded me of a time when central banks were too slow to respond to spikes in inflation.
While Federal Reserve data shows U.S. urban rental prices are steadily rising, a December Redfin report shows that median asking rents in November were down 2% year-over-year, compared to 2020. It was the biggest decline since then.
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Data from apartment search engine Rent.com also shows that rent prices have been on a downward trend since August 2023 and have plateaued in recent months.
“It's a huge delay and it pisses me off to no end,” he said. “I don't understand why they don't update the rent data to the latest data… now they're exaggerating inflation, but they were underestimating inflation before.”
Economists, including Powell himself, recognize this lag in housing services inflation.
“Housing inflation tends to lag other prices around tipping points…because of the slow turnover of rental-lease inventory. It's a timely indicator of what's going to happen,” Powell said in a 2022 Brookings Institution lecture.
Still spending money like a “drunken sailor”
Sternlicht believes that the federal government's continued high spending is contributing to the inflation problem.
“One part of the government, the Federal Reserve and Chairman Powell, is pumping the brakes, and the other part of the government, Congress, is spending as much money as it can,” Sternlicht said.
“what [Powell] What we really need to do is go across the street and tell Congress to stop spending money like a drunken sailor.”
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