On July 12, commercial real estate economist Peter Linneman appeared on the Walker Webcast to discuss data showing that the Consumer Price Index (CPI) had reached a two-year low in June. Despite this sign of tamed inflation, CNBC host Steve Liesman reported that 92% of those polled by the network expect the Federal Reserve to resume increasing its federal funds rate later this month. In his quarterly Linneman Letter, Peter predicted that by late summer, the Fed would realize their error and start cutting rates instead. He attributed their current monetary policy to “groupthink” and argued it doesn’t make sense for a federal funds rate 230-255 basis points above inflation when ideally it should be 25-50 bps over CPI growth.
In each edition of his letter, veteran economist and founder of Linneman Associates surveys both macroeconomic trends as well as major CRE sectors; he assigns these indicators ratings from one up to five dead canaries – after an old practice used in coal mines where birds were sent ahead into tunnels before miners proceeded – with only Fed’s monetary policy warranting four canaries in latest edition due largely alarmist headlines seen lately across all other CRE sectors which rated just one dead canary for speculative development within office/multifamily/industrial segments alone.
When asked how he’d advise diversified CRE investors during Q3 2019 on hour long webcast discussion with Willy Walker CEO at Walker & Dunlop ,Linneman advised holding current portfolio while investing through REITs into apartment sector “only because it’s more actionable quickly” but also suggested trying out industrial development given belief interest rates will be lower than pro forma come time construction loan is drawn down upon completion project . On demand replays available via YouTube channel hosted by company .
