Amid the backdrop of Iran military conflicts, uncertain job growth, higher oil prices and more, Linneman Associates’ Principal and Founder, Peter Linneman, shared his take on the U.S. economy with Willy Walker, chairman and CEO of Walker & Dunlop. The two discussed multiple topics during the March 11 Walker Webcast, which took place at the recent Real Estate Impact Conference at the University of Miami.
The Reality of Job Reports
Recent job numbers from the Bureau of Labor Statistics (BLS) led to many pessimistic headlines.
But Linneman didn’t buy the actual numbers, explaining the factors that generated doubt. First, responses from surveyed firms have been declining, suggesting that the corresponding numbers were also lower than the actual figures. Second, given ICE’s crackdown, businesses might be more reluctant to report their undocumented workers. As a result, “this information through their algorithms is interpreted as companies going out of business,” Linneman said.
Third, there are inconsistencies between job growth and other economic numbers. Linneman explained that in 2025, GDP growth was between 2.2% and 2.4%, while economic insurance claims remained flat. “You don’t get that kind of GDP growth with no labor increase,” he added.
As a result, Linneman views a more optimistic picture than what’s being reported.
What’s Going on with Inflation (and the Fed)
Walker asked Linneman about where Effective Federal Fund Rates (EFFR) should be these days. Linneman’s response was, look at inflation. While the reported Consumer Price Index has been in the upper 2% range, Linneman explained that “if you look at the roughly 80,000 items that people truly consume, inflation has been running about 2.1% to 2.2% for the last two years.”
The discrepancy is the Owner-Equivalent Rent (OER) figure, which accounts for one-quarter of the CPI and has been high in recent years. As Linneman discussed in previous webcasts, that metric is flawed because it’s not something homeowners actually pay for.
So, what about the EFFR? Linneman said that the current rate of 3.5% to 3.75% is “75 basis points too high.” He said he’s forecasting three rate cuts in 2026, with a 75 bps cut.
Data Centers and Coal Mine Canaries
The Linneman Letter (the company’s newsletter) uses a rating system called “canaries in a coal mine” to analyze commercial real estate headwinds and other issues. Walker pointed out that in the recent newsletter, 12 of 55 canaries were dead, representing the highest number since the pandemic.
Linneman explained that the issue involves pockets of risk, rather than a potential downturn or collapse. And one of those issues involves data center activity. He explained the yield on cost development is approximately 8%, suggesting that “a lot of money is going there, meaning the margins are very big.”
He explained that the numbers and activity suggest oversupply in the next four years, even with positive demand. “So, my concern is on the supply side,” Linneman said. “The other concern is, what’s the (equity) take-out? We don’t know.” As a result, deal pricing is based on those who act as if they know what the takeout is, rather than on reality.
“Everyone assumes that hyperscalers will be forever gold,” Linneman commented. Once upon a time, investors assumed the same thing with Ford Motor Company, General Motors and General Electric.
The Ongoing Housing Affordability Questions
Linneman and Walker also discussed housing affordability. Linneman indicated that affordability is more than simply mortgage rates.
First, there is plenty of NIMBYism and current homeowners blocking new housing construction. “If you own a home, the last thing you want is competitive supply,” Linneman observed. “People have figured out how to drive that politically.”
Second, there are the demographic and behavioral issues of potential homebuyers. Walker said the average age of a first-time homebuyer in America today is 39.
Linneman said that things were different when he married after graduating from college. “If you’re getting married in your 20s and having kids two and three years later, when do you need a backyard and schools?” Assuming the answer to that question is 30 years old, “you don’t do DoorDash, you don’t take a ski trip, you don’t take a Caribbean trip,” he said. “You need that money for the down payment.”
However, young adults are getting married and starting families later in life. This means the money goes toward vacations and DoorDash rather than savings.
Advice to the Audience
The duo ended the webcast with some life advice to the participants. Walker suggested that they “get everything out of the University of Miami that you can.” Linneman offered additional recommendations, noting that everything is about the journey, not the destination. “Make it a worthwhile journey and try to pick interesting places to go,” he added.
On-demand replays of the March 11 Walker Webcast are available through the Walker Webcast channels on YouTube, Spotify and Apple. Subscribe to get invites, replays and articles for new Walker Webcast episodes every week.
The post Walker Webcast: Economist Peter Linneman and Willy Walker Chat About Jobs, Fed Rates, Canaries and Housing appeared first on Connect CRE.
