Billionaire investor Jeff Greene expects a painful downturn and a potential slump in house prices. The real-estate tycoon says the Fed’s rate hikes will deal heavy blows to several industries. Greene expects an economic slump, AI, and remote working to weigh on commercial real estate. Loading Something is loading.
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Prepare for the US economy to slump and house prices to slide, Jeff Greene has warned.
The real-estate billionaire, who made a fortune betting against the mid-2000s housing bubble, spoke to Insider about his current outlook on Tuesday. He predicted painful fallout from governments and central banks spending trillions of dollars during and after the pandemic to prop up their economies.
“We’ve just taken the rollercoaster so high,” Greene said, comparing the fiscal and monetary binge to climbing to the top of Space Mountain at Walt Disney World.
Greene blasted the Federal Reserve for pumping money into the economy at times when shortages of workers and raw materials were pushing prices higher. He also slammed the US central bank for hiking interest rates from virtually zero to upwards of 5% since last spring in response to historic inflation.
“You’re firing a gun at the same dead body over and over again,” he said. “You’ve already killed the guy. I think that’s what they’re doing to the economy; it’s just gonna cause catastrophes in a lot of industries.”
Greene noted the unprecedented amounts of monetary and fiscal stimulus have forestalled a recession. However, he cautioned that everything from Wall Street deal flows to construction projects will dry up as liquidity is drained from the system.
He noted that rate hikes tend to hammer certain parts of the economy, but have little effect on sectors such as healthcare, education, and government.
“It’s really hitting some areas hard,” he said, pointing to commercial real estate and investment banks as examples. “They’re gonna get slammed, but a lot of people aren’t going to be affected at all.”
The real-estate tycoon — who met with John Paulson during the mid-2000s housing bubble, and made a fortune emulating the hedge fund manager’s iconic bet against subprime mortgages — flagged the likely impact of higher borrowing costs on house prices.
“People can’t qualify for mortgages anymore,” he said, noting the housing market has shifted from a state of frantic buying and bidding wars to paralysis due to rates rising. Sellers are mulling price cuts after receiving zero offers, while buyers are balking at paying much higher mortgage rates, he added.
Many people will eventually have to sell their homes for less than they’d like, for reasons like divorce or the loss of a family member. Unless rates decline soon, that’s likely to pull down house prices, Greene said.
The property developer, who has campaigned to become a Florida senator and the state’s governor in recent years, cautioned the challenges may only be starting.
“At some point it’s just going to be harder and harder to make money,” Greene said. He noted that many workers pushed for raises during the pandemic, but if the economy slows down, employers might seek to lay them off to slash their bloated overheads. Similarly, if landlords see vacancies rising and rents falling in their properties, they might have to cut costs as well, he said.
Greene predicted that artificial intelligence will “start to rear its ugly head” and “hit the white-collar workforce like a sledgehammer,” wiping out loads of jobs when the economy is already cooling.
Moreover, he pointed to the rise in remote working as a headwind for office buildings and other commercial real estate in towns and cities. “They’re not gonna need more office space, that’s for sure,” he said about companies.
Greene also touched on the stock market’s breathless rally this year, which has been fueled by investors betting an AI boom will supercharge the profits of Tesla, Nvidia, and other companies.
He emphasized that companies like Meta and Google are essential to people’s businesses, and suggested that integrating AI into their software tools would make them even more valuable. However, he cautioned that a wider economic slowdown would likely weigh on the stocks of companies that are vulnerable to a downturn.