By Willy Walker, CEO of Walker & Dunlop Fed’s Recent Mistakes In a recent Walker Webcast, “Most Insightful Hour in CRE with Dr. Peter Linneman” part of our ongoing webinar series, renowned economist Dr. Linneman and I discussed his views on monetary policy, inflation and what the economic and commercial real estate landscape looks like for 2023. Throughout the past year, the Federal Reserve has been raising the federal funds rate faster than we have ever seen. This, of course, has led to a drastic increase in the cost of borrowing, the likes of which haven’t been seen in decades. In just one year, the effective federal funds rate has increased from 0.08 percent in February 2022, all the way to a target range of 4.5 to 4.75 percent in February 2023. This has led many to believe that the Fed has considerably overshot where rates should be since the market wasn’t given ample time to react to each rate hike. This rapid increase in interest rates has reduced lending activity in terms of new loans, leading to a sharp decline in demand for real estate, as well as major price corrections. Additionally, the rapid rise in borrowing costs has …
