Look Out, Bubble Ahead (Thanks, Fed!): Real Estate Expert

“The economy has more positive to it than Washington, D.C., knows. It is not stagnating, given the private-sector job growth, strong auto sales” and other factors, said economist Ken Rosen, speaking at REITWorld 2013 in San Francisco on Wednesday.

Still, the head of the Berkeley, Calif.-based Rosen Consulting Group says, there’s likely another asset bubble in the works.

“My big worry over next few years is that we will we create another credit and asset bubble, because rates are too low. Money’s too easy. It’s a substantial risk,” Rosen said, predicting that it would emerge more clearly by 2016 or 2017.

“The Fed doesn’t worry about asset inflation and just deals with it after the fact,” he said.

Federal Reserve chairwoman nominee Janet Yellen, set to go before Congress on Thursday, is not expected to change the Fed’s tapering policies, Rosen notes. “She will testify and show she is a bit hawkish … because she has to be with those in Congress,” he said.

“I guess the first taper is in March, and then within a year, there’s no more quantitative easing. It’s not working,” said the consultant, who got his Ph. D. in economics from MIT and then taught at Princeton, as well as the University of California, Berkeley.

“I think Yellen will be forced to raise rates sooner than she thinks,” Rosen added.

He also pointed to factors supporting strength in the real-estate sector, such as very robust rental-rate growth in places like San Francisco, where there’s been a jump in new jobs tied to technology, especially social media, and in Houston and North Dakota, where employment in energy has been booming.

Overall, the number of jobs lost during the recent recession, about 8.8 million, should all be back by mid-2014. About 7.8 million have been recovered so far.  

“The stock market is already ahead of our year-end forecast,” said Rosen. It should stay there for a while as long as rates are low. “But when it turns, it’s going to hurt.”