- Starwood Capital Group CEO Barry Sternlicht told CNBC the housing market could see a “major crash.”
- If the Federal Reserve hikes interests rates again, a drop in demand could lower home prices, he said.
- But other experts said while prices may correct in some places, the market isn’t likely to crash.
The head of one of the largest apartment landlords and major single-family rental owner thinks that the housing market is about to collapse.
Barry Sternlicht, the CEO of Starwood Capital Group, on Thursday delivered a dire outlook on the US economy and housing market if the Federal Reserve maintains its aggressive monetary policy, including raising its benchmark rate. Housing prices could “correct,” perhaps violently, he noted during a CNBC interview.
“You are going to have a major crash in the housing market,” he said.
The views of the billionaire investor vary from many economists that see a much more modest impact on housing, which has been buoyed by its low supply for years. Price drops are likely in the hottest pandemic markets like Austin, Texas, and Miami, but a collapse or bubble burst is unlikely, some economists say, because reduced demand won’t be enough to offset the impacts of low supply.
Sternlicht, whose Starwood Real Estate Income Trust owns more than $29 billion of real estate including residential, retail and hospitality properties, suggested that the Fed’s current path was unnecessary given cracks already showing in the economy.
“The economy is breaking hard,” Sternlicht said in the CNBC interview. “If the Fed keeps this up they are going to have a serious recession and people will lose their jobs.”
The Fed has been trying to slow rapid inflation by raising the federal funds rate, which affects borrowing costs for both companies and consumers. The measures are aimed at cooling prices from the gas pump to the grocery store, though they risk backfiring if they cool demand too much.
Rate increases have so far boosted the price of home mortgages, putting the price of homes out of reach for more Americans and sending them to rentals, such as the 10,000 single family rental properties and over 54,000 rental apartment units owned by Starwood.