OpinionIndustry News

Fed should stop, not pause

Perspective: Higher interest rates pose worrisome risks for real estate

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

No one likes inflation, and the Federal Reserve's mission to fight this economic woe is an excellent concept for a government agency. Yet each time the Fed acts, or fails to act, the U.S. economy in general and the gigantic real estate sector in particular are at risk. That's why the Fed's hand on the lever of the U.S. economy should be moved at all times with delicacy and caution, and right now, not at all. The Fed has already increased its key short-term benchmark interest rate 17 times since mid-2004. That's a lot of tightening, and the full effects of the higher costs of borrowing are still working their way through the economy. For now, it's enough, perhaps even more than enough. The risks of too-high interest rates naturally are greatest for the economy's two most interest rate-sensitive sectors: real estate and automobiles, both of which depend heavily on buyer financing costs. Higher interest rates by definition mean buyers will pay more over the lifetime of the fin...