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Starwood Capital Group\u2019s chief executive and chairman doesn\u2019t seem to be a fan of the Federal Reserve. The billionaire behind the real estate investment firm, Barry Sternlicht, has mocked and blamed the institution and its chair, Jerome Powell, on several occasions. Sternlicht once called the Fed, \u201cJay Powell and his merry band of lunatics,\u201d in an interview<\/a> with Fortune<\/em>, claiming there\u2019d be \u201csocial unrest\u201d because of its monetary tightening. On another occasion, he called<\/a> the Fed\u2019s interest rate hikes \u201cself-inflicted suicide.\u201d And of course, some of his angst could have to do with the impact rate increases may have had on his own business, which has invested in and managed billions in real estate assets during the past three decades\u00a0<\/p>\n In an interview<\/a> with CNBC yesterday, Sternlicht didn\u2019t change his tune, although he was less colorful. \u201cThis is my problem with Powell,\u201d he said. \u201cHis policy has now crushed multifamily starts; we need houses.\u201d<\/p>\n Sternlicht continued: \u201cSo with only 220,000 houses coming in [2026], I will guarantee you rents will go up in \u201926, unless there\u2019s a massive recession.\u201d Essentially, he\u2019s suggesting that fewer apartments will be built in the coming years because of increased cost and risk, which then means rents will go up because it\u2019ll only worsen an already existing housing shortage<\/a>. The country is missing millions of homes<\/a>, and it\u2019s partly why home prices haven\u2019t fallen, despite skyrocketing mortgage rates<\/a> and depressed sales activity.\u00a0<\/p>\n When it comes to rents, which along with home prices rose throughout the pandemic-fueled housing boom, they\u2019ve sort of flatlined. But, in some places, they\u2019ve dropped because of a recent boom in multifamily construction: According to<\/a> Redfin, \u201cthe Sunbelt is seeing some of the biggest rent declines in America.\u201d\u00a0<\/p>\n \u201cThe Sun Belt has built a ton of new apartments in recent years, partly to meet the surge in demand brought on by the flood of people who moved in during the pandemic housing boom. But the boom is over, and now property owners are struggling to fill vacancies, which is causing rents to fall,\u201d Redfin Senior Economist Sheharyar Bokhari said last month. \u201cThe good news is that the uptick in housing supply in the Sun Belt has improved affordability for renters, which can be a lesson for other American cities grappling with housing affordability challenges.\u201d<\/p>\n Still, some suggest<\/a> this is a temporary phenomenon, similar to what Sternlicht is arguing. And again, this weakness in multifamily homes isn\u2019t great for investors, who are often blamed<\/a> online for the housing crisis. But it is good for typical Americans.\u00a0<\/p>\n When the Fed began raising interest rates to tame inflation, it sent a shock to commercial real estate, and multifamily. Values that rode the money waves of the pandemic plummeted, and loans are maturing in an environment where rents have cooled off and interest rates are much higher.\u00a0<\/p>\n There could be more pain ahead for all commercial real estate, and it still feels as though the entire sector is at a standstill. \u201cTransaction volumes across the world are still down 70%,\u201d Sternlicht said. \u201cThere are no trades. So the only one who\u2019s trading is a mortgage coming due, and if they can\u2019t find somebody to rescue them, they\u2019ll sell it.\u201d And banks don\u2019t want a non-performing mortgage, so they sell, too, he said, referring to short sales.\u00a0<\/p>\n Every time there\u2019s a crisis, said Sternlicht, there\u2019s a disconnect in what buyers are asking for and what sellers want. Sellers want to bargain and buyers want yesterday\u2019s prices, Sternlicht explained. But that gap has shrunk. \u201cThe spreads are coming in, which means the markets are healing\u2014the future is getting clearer, particularly for apartments,\u201d he said.<\/p>\n<\/div>\n\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n<\/div>\n