I’m giving this. a go. I obsess about getting this information to all of you in an informative way.
This is my first attempt.
I am interested in how the real estate market coexists with the financial markets. I love data. I like to try and make conclusions about what I see and whether it’ll benefit my family.
Like many of you, this is the first violent, sustained crash that’s affected me. Although I was alive in 2008, I wasn’t paying attention, and investing was the furthest thing from my mind. NY real estate was even more abstract.
I went to school across the river in Hoboken, and I visited NYC once in three years.
Things have changed, and I’m more immersed in NYC than ever. The real estate market here has been on a tear since the 2020 election. It continues to move forward.
The market is highly liquid. Buyers attack well-priced apartments with multiple offers and bidding wars. NYC has been plugging along while the rest of the united states saw ludicrous price appreciation. It’s unlike anything I’ve expeereicned since I started in the business five years ago.
Below is a general overview of what I’m seeing.
Supply inventory in Manhattan is now 6294, up 7% compared to this time last month. Over the last week, supply is up ~514 listings. This number should continue to increase through mid-June. At that point, listings will begin to come off the market until Labor Day.
We’ve seen quite a bit of new inventory come on over the last month, but pending sales have moved up in lockstep.
I’m not smart enough to know ahead of time when this turns, but I will be on the lookout.
Pending Sales are at 4,714 listings, up 7% compared to last month. The level of growth for both Supply and Pending sales is the same month-over-month. In a slowing market, we would begin to see pending sales stagnate and supply grow higher. Notice how high we are relative to previous years with this pending supply number.
While it’s not the same frenetic pace we saw last year, contracts are still happening.
The Market Pulse, a supply vs. pending sales ratio, is now .75. This number is flat month-over-month and 7% higher than last year.
This number won’t reflect rising interest rates for a few months. One hypothesis is that buyers are doing their best to lock in interest rates as they increase throughout the year. At some point, we’ll reach an inflection point. Buyers will tap out. We’ll start to see supply pick up, price reductions increase, and pending sales will tick down.
The grey area is a neutral market. One hypothesis to consider is that Millennials will continue buying because we’re flush with cash. Or, we have a parent who is. Much of the real estate market here is all-cash.
I also think we would have seen higher appreciation if it weren’t for the most hated entity in all of NYC real estate, co-op boards.
Rental inventory is now 4,648 listings in Manhattan. I’m not sure this will slow down any time soon. We continue to set new rent records with a meager vacancy rate. Anecdotally, many of the landlords we work with have minimal tenant turnover.
We think that tenants want nothing to do with searching for an apartment right now. After being down from the all-time highs, we saw in 2019.
We’re approaching a new class of graduates that want to be in New York to start their careers. They’re entering one of the worst rental markets we’ve seen in a long time. #welcometoadulthood
Ohhhh mortgage rates, how much you’ve grown up. This increase in mortgage rates just made your payment 20% more expensive. The Fed says, “You’re welcome”.
I don’t need to say much more than this;
Mortgage rates will price some buyers out of the market entirely. Other buyers will decide that buying a home is too rich for their blood. One counterpoint, renting has gotten more expensive EVERYWHERE and isn’t a cheaper alternative
I wasn’t smart enough to know interest rates could get this high, this fast. But, one of the best things we’ve ever done was refinancing at a sub 3% interest rate.
If you haven’t obsessively checked your stock portfolio on the hour, the stock market is all over the place.
Growth stocks have been under pressure since November of 2021, and some have been on a downtrend since Feb 2021. A lot of people are feeling the pain.
This is the worst year for the S&P 500 since 1939. It’s “only” down 16%. If you’re in any growth names, you know that it’s much worse.
If you’re smarter than me and decided to buy ETFs, you’re less panicked with the 16% drawdown.
Here’s a chart showing the drawdown’s from all-time highs in a few growth names. (Yes, that sound you hear is me whimpering and sucking my thumb under my bed).
Count your blessings, but we’re not done. In June, the Federal Reserve will begin to offload assets from its balance sheet. In short, it could get even more volatile. The entire stock market could go down further. While this happens a lot, and it’s not all that concerning, it’s worth keeping an eye on.
We could have further pain on Wall Street and YOLO on Main Street. The Fed’s goal is a soft landing and not all-out pandemonium as they unwind their balance sheet. $47.5 billion will roll off their books. Over three months, that number will increase to $95 billion.
Their goal? Slow down inflation.
You may not have noticed, but life is damn expensive. The price of goods YOY is 8.5%. The good news? We might have reached peak inflation. The not-so-good news is we don’t know how long it’ll last. YOLO, summer will cost you a lot more than it did.
While we’re on YOLO summer, check out the inflation for airline fares since last year.
Inflation is hitting EVERYONE. It’s being felt most by the lower class. A large percentage of wages is used to fill gas tanks and feed their families. Consumer sentiment is down and will lead to a cascade effect in the US economy. That’s a conversation for another day.
This rant has gone on long enough. Thank you for making it this far.
I’ll likely begin to put together market updates and post about other bits of my work. If you know me, I’m open to questions, and it’ll help shape where this goes.