Apr 5, 2024
While we adhere to strict editorial guidelines, partners on this page may provide us earnings.
Billionaire Barry Sternlicht is calling out 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, thinks the Fed is overstating inflation and hurting real estate, pointing to rent prices that have declined across America.
Don't miss
- Commercial real estate has beaten the stock market for 25 years — but only the super rich could buy in. Here's how even ordinary investors can become the landlord of Walmart, Whole Foods or Kroger
- Cost-of-living in America is still out of control — use these 3 'real assets' to protect your wealth today, no matter what the US Fed does or says
- Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here's how you can save yourself as much as $820 annually in minutes (it's 100% free)
"We were minding our own business. Usually, we screw up the global economy — the real estate industry. We overbuild the housing market like we did in the Great Financial Crisis" Sternlicht said during a March interview on "In Depth with Graham Bensinger.”
Advertisement
"This time we didn't. We were just collateral damage."
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Sternlicht says Fed is using an ‘arcane’ tool
Sternlicht denounced rate hikes as "arcane and not appropriate" for the current economy, pointing to the still-robust job market.
However, he also acknowledged the Fed has no other tool to combat inflation.
"I've been through five or six crises,” he said. “This one feels the worst to me,"
While it’s possible the Fed could start introducing cuts to the key rate as soon as June this year, Fed Chair Jerome Powell has emphasized it will all depend on the incoming data.
Conflicting rent data
Sternlicht criticized the Fed's method of measuring inflation in the housing market, accusing it of using rent data that’s about a year old and recalling when the central bank responded too slowly to burgeoning inflation back in December 2021, despite surging rent prices.
Although Fed data shows U.S. city rent prices steadily climbing, a Redfin report said, "For the majority of 2022, growth in asking rents slowed rapidly following a surge during the pandemic, and in 2023, asking rents actually declined on a year-over-year basis."
Read more: These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes. Here's how
Advertisement
Data from apartment search engine Rent.com also shows rent prices have been trending downward since August 2023, plateauing in the last couple months.
“It’s a huge lag and that angers me to no end,” he said. "I don't know why they don't update the rent data to current data ... Now he's overstating inflation and before he was understating it."
Economists, including Powell himself, are aware of this lag in housing services inflation.
"Housing inflation tends to lag other prices around turning points … because of the slow rate at which the stock of rental leases turns over. The market rate on new leases is a timelier indicator of where overall housing will go over the next year or so," Powell said during a speech at Brookings Institution in 2022.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Still spending like ‘drunken sailors’
Sternlicht believes the federal government continuing to spend heavily is contributing to the inflation problem.
"You have one part of the government with their foot on the brake, the Federal Reserve and Powell, and then you have the other part of the government, the legislature, spending as much money as they can,” Sternlicht said.
“What [Powell] really needs to do is walk across the street and tell Congress to stop spending money like drunken sailors."
What to read next
- Leonardo DiCaprio and Oprah Winfrey invest in this asset to keep their wealth safe — you may want to do the same in 2024
- Rich young Americans have lost confidence in the stock market — and are betting on these 3 assets instead. Get in now for strong long-term tailwinds
- Jeff Bezos told his siblings to invest $10K in his startup called Amazon, and now their stake is worth over $1B — 3 ways to get rich without having to gamble on risky public stocks
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
