The U.S. housing market is in for a prolonged slump, according to at least one expert.
In a recent interview with Fox Business, ProChain Capital President David Tawil discussed the Federal Reserve’s ongoing battle with inflation and why a prolonged period of high interest rates could “crush some very interest-rate-sensitive industries, such as real estate.”
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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.
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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.
