It’s the economy, idiot.
This mantra, which helped former President Bill Clinton win the presidency in 1992, emphasizes how important a strong economy is to people’s lives.
Unless you’re a real estate broker in New York City right now.
In that case, we might be expecting signs of a weakening economy. That’s because a resilient economy will encourage the Federal Reserve (Fed) to keep raising interest rates to keep inflation down to 2%. High interest rates put pressure on the real estate market.
Strong economic data, including last month’s better-than-expected jobs report, may cause the central bank to push interest rates faster and higher than previously expected, Federal Reserve Chairman Jerome Powell said Tuesday. . This could push up mortgage rates and discourage people from buying or listing homes.
Until recently, the consensus among brokerage executives and star agents was that a strong market would emerge in the second half of 2023. Brokers say activity is returning to the market, but Powell’s recent statement casts doubt on that optimistic forecast.
“We’re finally starting to see light in the tunnel, but the Federal Reserve is screwing it all up,” said Jessica Peters, a broker at Douglas Elliman. “We have had a very difficult last six months overall.
Buyers aren’t getting the discounts they expect in a depressed market, Peters said. High labor costs and inflation are preventing developers from lowering prices, especially in new developments.
“Buyers are out there. They’re just very picky,” she said. “People don’t want to buy dirty apartments these days. They don’t want to buy buildings that don’t have the roof her deck finished.”
Coldwell Banker Warburg broker Jeremy Kamm says the studio and one-bedroom market remains tough and buyers are staying away from buildings with high monthly rates. He’s also seeing more all-cash transactions.
“I think in the last eight months or so, every transaction over $2 million was a cash transaction,” he said, referring to a sample of about 10 transactions.
Kamm recalls a buyer who entered into a contractual scheme to finance 60% of the $3 million purchase, but only to buy the house outright.
“When she worked out the numbers and confirmed how much to pay, [in interest]it makes more sense to liquidate even if the stock is challenged,” he said. “She can still enjoy mortgaging the house two years from now. [if rates fall]”
Examples like this made UrbanDigs co-founder John Walkup suspicious of the impact of mortgage rates on the city’s real estate market, especially in Manhattan. His real estate data firm has tracked the relationship between mortgage interest rates and signed contracts.
“You would think there would be a natural relationship between the two,” he said. “There is a relationship, but it’s pretty weak to be honest.”
To that effect, Nest Seekers broker Bianda D’Alessio said business was booming for her. “This is one of the best first quarters of her I’ve seen in my entire career,” she said.
This morning’s national jobs data will help gauge how aggressive the Fed will be at its meeting this month, according to Melissa Cohn, mortgage banker at William Raveis Mortgage.
“We’re looking for someone who got a job in February,” Cohn exaggerated. “If we see these good numbers, I think rates will really start to settle — and the New York market will like low rates.”
Cohn said investors expect the report to show 225,000 jobs created in February. Anything over that will have a negative impact on the rate.
However, a sharp drop in job creation could lead to moderate interest rates that would catalyze the city’s property market, but Mr Cohn said the Fed could see other indicators such as the producer price index and the consumer price index. It was also pointed out that
“If 150,000 new jobs are created, the market will thrive,” she said. “We’re going to have a big day on Wall Street.”