Finance & Economy

Government & Policy


New year, new market insights with Dr. Peter Linneman

January 10, 2024

New year, new market insights with Dr. Peter Linneman

Dr. Peter Linneman

Leading Economist, Professor Emeritus, The Wharton School of Business

Recently, fan-favorite guest and my great friend, Dr. Peter Linneman, joined me for his 16th appearance on the Walker Webcast.

Recently, fan-favorite guest and my great friend, Dr. Peter Linneman, joined me for his 16th appearance on the Walker Webcast.  For those unfamiliar with Peter, he is the principal of Linneman Associates, as well as the CEO and Founder of the American Land Fund and KL Realty.

We talked about everything from interest rates and real estate to miracle weight loss drugs Ozempic and Wegovy and their potential effects on healthcare spending.

A look back at Peter’s 2023 predictions

At the beginning of each year, Peter puts out his predictions for what will happen in real estate and the broader economy. Going into 2023, Peter believed that we would not see a recession and that we would actually see GDP growth. While many analysts believed that we would see a down year for the equity market, Peter claimed that we would see growth in equities.  

He also believed that crude oil would drop slightly from around $80/barrel and that the 10-year treasury would end the year between 3.3 and 3.8 percent. Lastly, Peter believed inflation was coming in line and that the Fed was looking at the wrong indicators. Peter was correct in every single one of his predictions for 2023, which is phenomenal considering the uncertainty going into the year.

Are rate cuts coming in 2024?

Jerome Powell shocked the world during his last speech when he said that the Fed foresees several rate cuts coming in 2024. While many believed that he would not posture as if the Fed was cutting rates until the middle of this year, Peter was not surprised. Peter has been beating the drum that the Fed has been basing its interest rate decisions on the wrong data for quite some time now.  

He believes that looking at year-over-year inflation data is the wrong way to look at inflation, no matter which index you use to measure inflation. Instead, Peter insists that the better metric for measuring inflation during the 2021-2023 spike in inflation is by annualizing the month-over-month inflation metrics. Since the Fed was not doing so, it was looking at terribly outdated data, which overstated the amount of inflation we were truly seeing. This, of course, led the Fed to increase interest rates higher than they ever needed to in order to get inflation under control.

The biggest investing mistake you can make

The theme of this quarter’s Linneman Letter was “getting in the game.” In the letter, Peter suggests that oftentimes, the best time to make investments in anything, whether it be equities or real estate, is when there is turbulence. Peter cites that investments made during times of turbulence in the capital markets yield outsized returns over the course of seven to ten years.  

Peter believes that many investors are making a “type two” mistake right now in the real estate market. For those unfamiliar with the term, a type two mistake is when you don’t believe something that is statistically true or, in layman's terms, not making an investment when you should. Peter sees that many investors are overthinking, overanalyzing, and completely missing the fact that things are quite dynamic. Unfortunately, it’s difficult to model in a spreadsheet the pace at which markets move and the directions in which they will move. This leads many to lack courage during a time when those who have both capital and courage will prevail.

Although getting out there and putting capital to work right now might seem intimidating in the moment, Peter believes that those who do will be handsomely rewarded in the long run, much like the late Sam Zell was.

The top in-demand asset classes

Now, nearly 75 percent of real estate construction spending is going toward industrial and multifamily projects. Industrial construction spending represents roughly $263 billion (48 percent) of spending, while multifamily represents roughly $129 billion (24 percent). This shows that everyone wants to build and own industrial and multifamily properties. This phenomenon is driven by the fact that there is a severe lack of supply in the industrial space, and there are pockets of supply deficits in multifamily.  

However, the interesting driver of multifamily development is the fact that single-family construction simply cannot keep up with demand, and the prospect of homebuilders catching up in the short term seems like a long shot. This has led to a drastic increase in single-family home prices, which has priced countless prospective home buyers out of the market, forcing them to live in multifamily properties.  

2024 Linneman predictions

It’s a new year, so Peter has a brand new set of predictions for us:

  • Five rate cuts by the end of the year.
  • 10-year treasury yield of 3.4-3.5 percent by the end of the year.
  • Dow ends the year up 6-7 percent year-over-year, with the potential for a big run.
  • Oil ends the year at $65-$70 per barrel, driven by increased US drilling. (In Q4 2023, the US pumped more oil than any country has ever pumped in a single quarter.)
  • GDP growth will be around 2.5 percent from 2024 to 2027.
  • Jerome Powell does not get reelected as Fed Chair in 2026.

As we saw in 2023, Peter’s predictions were spot on. Only time will tell if he will knock it out of the park again with his 2024 predictions. Regardless of how his predictions do, one thing you can be certain of is that we will continue to have a conversation with Peter on the Walker Webcast every quarter.

Read Transcript

Related Walker Webcasts

Investing in the Post-Modern Cycle

April 17, 2024

Finance & Economy

The Most Insightful Hour in CRE with Dr. Peter Linneman

April 10, 2024

Finance & Economy

Real Estate

The evolution of higher education with Mary Sue Coleman

April 3, 2024



Check out the latest relevant content from W&D

Learn more

News & Events

Find out what we're doing by regulary visiting our News & Events pages

Learn more