Real estate expert Peter Linneman poses the question in his latest quarterly newsletter: why has the Federal Reserve’s continuous increase of short-term interest rates not slowed down the economy? According to Linneman, approximately 80% of the U.S. economy is not affected by these rate changes.
During a recent Walker Webcast at New York Stock Exchange, hosted by CEO Willy Walker since 2020, Linneman discussed how components of GDP such as government hiring and healthcare spending are not sensitive to federal funds rate movements. He also mentioned that housing finance remains unaffected by inflation due to homebuyers locking in lower rates before recent increases.
Linneman believes that there is a fundamental shortage of housing which has led to an increase in home prices. Despite this, he argues that actual inflation is lower than reported and questions why the Fed continues raising rates when annualized monthly inflation typically runs between 2-3%.
In previous appearances on Walker Webcast, Linneman predicted that if interest rates were truly indicative of inflation levels then they would have started decreasing already instead waiting until well into 2024. He also emphasized how government policies do not significantly impact long-term economic growth or real estate investments.
The hour-long discussion between Walker and Linnemann covered various topics including yield curve trends and office-to-residential conversions among others. The Oct.11 webcast can be replayed through YouTube, Spotify or Apple channels without any mention Connect CRE platforms.
