On January 15, 2025, the Walker Webcast was held live in Philadelphia and marked two significant milestones. It was the 20th time that Willy Walker, President and CEO of Walker & Dunlop, hosted economist and author Peter Linneman. The event also celebrated the 25th anniversary of Linneman’s well-respected economic newsletter, the Linneman Letter.
During their discussion on various topics mentioned in the newsletter such as a review of the past quarter century, current events and a forecast for 2025; one topic that stood out was disasters. Specifically,the ongoing Russia-Ukraine War and recent Southern California wildfires were discussed.
Linneman noted that despite its horrific nature,the Ukraine war has actually benefitedthe U.S.economy due to increased exports of oil,gas,and agricultural products as Ukraineand Russia have been cut off from exporting these goods.”Back-of-the-envelope” calculations suggest an added boost to GDP ranging from20-60 basis points (bps)from these three areas alone.
Turning to California’s wildfires,Linnemansuggestedthat this tragedy could ultimately leadto positive change forthe state.He explained,”It will triggera lotofreflectionand hopefully resultin measures being taken to prevent similar situations from happening again.”
The duo also delved into how proposed tariffs by then-President-Elect Donald Trumpmight affect inflation rates which were currently at2.9%.Linnemansaid there are two things we can be sure about:Trumpwill likely back awayfrom some oftoutedtariffs,and even if they are enacted,it is unlikelythey will significantly impact inflationdue to America not being heavily relianton imports.Historical data alsosuggests little correlation between tariff increasesandinflation rates.Like previous administrations under both Trumpand Biden,tariff hikes did not directly causean increase in inflationrates accordingtoLinnenman.
Next upfor discussionwere interest ratesrelative tocapp rates,which are expectedto decrease to 5% in the next12-24 months.Linneman predictedan increasein capital flow as a result.”In periods of super-low interest rates,no one wants to lend,”he explained. “At the worst possible time,you have to shift from cheap debtto expensive equity when investors demand higher returns,and this leads tocapp rate increases.”
To further illustrate his point,Linneman used an analogyofthe ocean,with its seabed and water on top.The seabed representsinterestrateswhile rainand windarecapital flows.He stated that while interestratesmay change,the fundamental factors influencing capitalflows such as supply and demand remain constant.
When asked for predictions for 2025,Linnemansaid he expects GDP growth between2.7%-2.9%,dependingon developments in Ukraine.S&P500growthcouldincreaseby7%-9%,crude oil prices could reach$68-$70 per barrel,and there may be a drop of100bpsin the Effective Federal Fund Rate.
In terms of commercial real estate investments,Linnenman suggestedthat multifamily properties may attract”stay rich”investorswhile office spacesmay appealmoreto those looking togrow their wealth.However,he also acknowledgedpotential NOI issuesand investor reluctance towards office properties.In contrast,data centers could see increased investment from risk-taking individuals due to concerns about overbuilding.”No matter how strongthe market fundamentals seem,it is still possiblefor oversupply,”Linnenman cautioned.
For those who missed it,the January15 Walker Webcastis availableon-demandthrough various channels including YouTube,Spotify,and Apple.Subscribeto these channelsfor invites,replays,and articles on upcoming episodesofWalker Webcastevery week.
