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Starwood CEO predicts there will be a ‘major crash in the housing market’

  • Starwood Capital Group CEO Barry Sternlicht told CNBC the housing market could see a “major crash.”
  • If the Federal Reserve raises interest rates again, a drop in demand could lower house prices, he said.
  • But other experts said that while prices may correct in some places, the market is not in danger of crashing.

The head of one of the world’s largest apartment owners and large single-family rental landlord thinks the housing market is on the verge of crashing.

Barry Sternlicht, CEO of Starwood Capital Group, delivered a dire outlook on Thursday for 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 in a CNBC interview.

“You’re going to have a major crash in the housing market,” he said.

The billionaire investor’s views vary from many economists who 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 bursting of the bubble is unlikely, some economists say, as reduced demand won’t be enough to offset the effects of a low offer.

Sternlicht, whose Starwood Real Estate Income Trust owns more than $29 billion in real estate, including residential, commercial and hotel properties, suggested the Fed’s current trajectory was unnecessary given the cracks already visible. in the economy.

“The economy is crashing hard,” Sternlicht said in the CNBC interview. “If the Fed continues like this, they are going to have a severe recession and people are going to lose their jobs.”

The Fed has tried to slow rapid inflation by raising the federal funds rate, which affects borrowing costs for businesses and consumers. The measures are intended to cool pump prices at the grocery store, though they risk backfiring if they cool demand too much.

Rate hikes have so far driven up the price of home loans, putting home prices out of reach for more Americans and sending them up for rent, like the 10,000+ single-family rental properties of 54,000 rental apartments owned by Starwood.