Former Fed Official: Money Should Not Be Free
Former Fed official Roger Ferguson told the audience at MBA-CREF that CRE will have to get used to higher interest rates.
SAN DIEGO—If anyone should understand how the cost money and interest rates affect commercial real estate, it would be Roger Ferguson, who was the vice chairman of the Federal Reserve’s Board of Governors from 1999 to 2006 and the former CEO of TIAA. So when he told the audience at MBA Commercial/Multifamily Finance Convention and Expo here in San Diego that the CRE industry would have to get used to a new normal in interest rates, it took note.
Ferguson explained that he doesn’t expect the US to return to a place of deflation which drives negative rates. “I think we are going to see a return to the kinds of interest rates where they are around 5%,6%,7%, not the 12% that our parents had to deal with. Flat rates weren’t the norm. Money should not be free and we are getting back to that.”
The Fed, in short, will continue to raise rates, he said. “What I see is very much what everyone sees…The Fed has been taking action and that is certain.”
Other dynamics affecting the industry, though, are less certain, he noted, such as “what is happening in terms of office and housing and people going back to work after the pandemic.” Some things, though, remain familiar. What is driving the multifamily space is demographics and the aging population, he explained. “There is also the question of the broader trend to new family creation,” he added.
Earlier in the day, the Mortgage Bankers Association awarded Chris LaBianca, Managing Director at UBS Real Estate Finance, with the 2023 Commercial Real Estate Finance Distinguished Service Award. “Chris has demonstrated his unwavering commitment and leadership to MBA and the commercial real estate finance industry throughout his illustrious career,” said Matt Rocco, MBA 2023 Chairman and President of Colliers Mortgage.
Rocco added that “By serving in MBA leadership roles on several councils and committees, Chris has been a leading voice and strong advocate for many top industry issues. I am thrilled to see his efforts recognized by his peers with this prestigious award.”
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