The Federal Reserve's continued rake hikes will cause a "major crash" in the housing market, Starwood Capital Group CEO Barry Sternlicht is warning.
"You've caused a crash of unprecedented proportions," Sternlicht said in an interview with CNBC's "Squawk Box," pointing out that "500,000 single-family new sales is the lowest since 1952."
Further, housing prices are going down, while mortgage rates are climbing, Sternlicht said. Mortgage rates for a 30-year fixed loan have climbed to over 6%, rising from 3.29% at the beginning of the year, reported CNBC, quoting Mortgage News Daily. The rate of rent growth is also slowing as rent prices climb, said Sternlicht.
"The CPI [consumer price index], the data they are looking at is old data," he said. "All they have to do is call Doug McMillon at Walmart, call any of the real estate fellows and ask what is happening to our apartment rents."
Sternlicht also warned that the economy overall is headed for serious problems if the Fed doesn't cut back on rate hikes, and he believes a "serious recession" is imminent.
"I think [in the] fourth quarter, I think right now, you are going to see cracks everywhere," he said.
The Fed has raised interest rates four times this year; and next week, it's expected to increase them by another 75 basis points to try to slow inflation. But still, consumer prices are climbing, going up by 0.1% rather than dropping by 0.1%, as economists surveyed by Dow Jones had been expecting.
Part of the issue, Sternlicht said, is that the Fed reacted too slowly to the inflation issue and is being too aggressive now to catch up, resulting in the economy "braking hard."
"If the Fed keeps this up they are going to have a serious recession and people will lose their jobs," he warned.
CEO confidence is also "miserable" and consumer confidence is "terrible," Sternicht added, and that will particularly show up at Christmas.
"If you survey the consumer, half of the people will spend less this year on goods than they did last year, [as] 20% of people will spend 50% less than they did last year and they're doing that against piling up inventories," he said.
The Fed's target on inflation is 2%, he added, but inflation should run at 3% to 4%.
"Inflation that is driven by wage growth is fabulous. We should want wages to go up," he said. "You can pay higher rents, you can buy your equipment, you can go to the restaurant if you have high wage growth."
Sandy Fitzgerald ✉
Sandy Fitzgerald has more than three decades in journalism and serves as a general assignment writer for Newsmax covering news, media, and politics.
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