'There will be a fallout': This fund boss is warning of a 'decade-long' smackdown of US housing if interest rates remain elevated. But he does see one asset jumping 67%

Tawil predicted a “multiyear, maybe decade-long fallout,” starting with commercial property and spilling over into the residential sector later.

“Housing has been incredibly strong despite all of the turmoil going on with respect to rates,” he said.

“There will be a fallout.”

Tawil’s thesis

“I think rate hikes are on the horizon,” Tawil said in the interview. His thesis is based on the fact that core inflation – the surging price of goods and services excluding volatile elements like food and fuel – have proven stickier than expected.

Whereas overall inflation cooled to 3% in June, according to the Fed’s latest numbers, the core consumer price index (CPI), which excludes food and energy, remained elevated at 4.8%. This measure has been persistently and stubbornly high for the past few years.

In a recent study, researchers from the Federal Reserve Bank of San Francisco went a step further to explore what they call “supercore inflation,” which excludes the prices of food, fuel and housing. The researchers speculated that this subcategory of price pressure could be persistent, even if the job market cools down.

If that proves true, the central bank may have to keep interest rates elevated longer, a situation that Tawil believes could force the real estate market into a difficult period of adjustment. Faced with the prospect of refinancing properties at high rates, many owners, in both commercial and residential sectors, may decide to cut their losses and sell, which would put more inventory on the market, causing prices to fall.

He suggests investors look elsewhere to protect or expand their capital. Specifically, his team is focused on technology and cryptocurrencies such as Bitcoin.