President of the Boston Fed Eric Rosengren is worried that the rise in commercial real estate prices will lead to a bubble that could burst once interest rates rise.
The current low rates have unprepared investors taking too much risk in a search for higher returns, he says. "The trend in commercial real estate prices should be thoughtfully monitored," he says, questioning all the construction's sustainability.
Commercial real estate prices have grown rapidly in recent years, despite only modest growth in GDP, Rosengren says. Other Fed officials are also worried about financial instability, with S.F. Fed President John Williams also noticing signs of price imbalances. [MW]
