Again The Fed Says CRE Valuations Are Inflated
WASHINGTON, DC–The Federal Reserve has said on a number of occasions that asset valuations, including in the commercial real estate sector, are inflated. It did it again on Friday in its Monetary Policy report that it released to Congress. It wrote:
Valuation pressures continue to be elevated across a range of asset classes, including equities and commercial real estate. Over the second half of 2017, valuation pressures edged up from already elevated levels. In general, valuations are higher than would be expected based solely on the current level of longer-term Treasury yields.
This has been a theme that has appeared regularly in Fed speeches, reports and interviews. Shortly before she left, former Fed Chair Janet Yellen told CBS that US stocks and commercial real estate prices are elevated. Commercial real estate prices are currently “quite high relative to rents. Now, is that a bubble or is it too high? And there it’s very hard to tell. But it is a source of some concern that asset valuations are so high,” she said.