Commercial Real Estate and QE1

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    Today in my Intermediate Macro class my professor went over the decline of commercial real estate during the worst of the recession and how it was so much worse off than other parts of the economy. He went through the growth rates (which were mostly negative) quarter by quarter until QE1. He said once QE1 took effect that that sector started showing positive growth rates. A fellow student chimed in saying that since commercial real estate starting growing once the stimulus took effect it essentially was a discredit to Austrian economics, to which the professor replied that it was indeed and the free market was to blame.

    However, it was my thought that if anything this would be consistent with the ABCT. Sectors of the economy that are most sensitive to interest rates would be most affected by the boom and bust cycle and it seems that this was the case with commercial real estate. Also, since commercial real estate was dependent on these artificially low interest rates it would make sense this sector would appear to recover once more money was created.

    Am I right in my basic understanding?


    Commercial Real Estate hit bottom in March 2011:

    Most of QE1 took place from late 2008 to March 2009, the entire program was finished by March 2010:

    Aside from this problem of timing, the money was not spent to prop up commercial real estate.


    So my professor was completely off in everything he said?


    It would take a fancy argument to demonstrate that bailing out Fannie Mae and Freddie Mac and other financial institutions in 2009 somehow revived commercial real estate in 2011.

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