Is There A Difference In Inflation?

The Weekly Recap

Good morning and happy Friday! Hope everyone has a great 4th of July weekend. There’s a leaning office-to-resi tower of New York, the USMNT was eliminated from the World Cup. Investors are bullish on the dollar while Hedge Funds had their best first half of the year since 2021. NYC hasn’t built this many apartments since 1965, Manhattan luxury sales are not impacted by the ‘Mamdani Effect’ while office leasing in Manhattan saw its strongest gain in 20 years and people are buying space rocks to flex their wealth.

If you missed my previous newsletter before the holiday on Is It Time to Sell?, you can read that through the link.

Is There a Difference In Inflation?

Inflation is once again making headlines, but today's inflationary environment is very different from the one that disrupted the housing market just a few years ago. Understanding that difference can help buyers and sellers make more informed real estate decisions.

The inflation surge following the pandemic was broad-based and demand-driven. Trillions of dollars in government stimulus entered the economy while interest rates remained near historic lows. Consumers had more money to spend, supply chains struggled to keep up and prices rose across nearly every sector. To bring inflation under control, the Federal Reserve responded with one of the fastest interest rate hiking cycles in history, sending mortgage rates sharply higher.

Today's inflation is vastly different.

Rather than being fueled by excessive consumer demand, much of the current inflationary pressure has been driven by higher energy prices. Rising oil costs increase transportation, manufacturing, and shipping expenses, which eventually flow through to the prices consumers pay. While that certainly affects inflation, it is far less widespread than the economic conditions that existed during the pandemic recovery. It is a very important and encouraging distinction.

Energy-driven inflation has historically been more temporary because oil prices tend to fluctuate with global supply, geopolitical events, and production levels. As those pressures ease, inflation can moderate without requiring the aggressive monetary policy that characterized the last cycle.

 If inflation remains concentrated in energy rather than spreading throughout the broader economy, financial markets may become increasingly confident that today's price pressures are temporary. That could help stabilize mortgage rates over time, improving affordability for buyers and encouraging more activity in the housing market.

Meanwhile, today's housing market remains fundamentally healthy. Homeowners continue to benefit from record levels of equity, lending standards remain strong, and many buyers are finding opportunities through increased inventory and seller concessions.

While no market is without uncertainty, understanding the source of inflation is critical. Unlike the broad economic imbalances of a few years ago, today's inflation appears more concentrated and potentially shorter-lived. If energy prices begin to stabilize, both inflation and mortgage rates could follow, creating a more favorable environment for buyers, sellers, and the overall housing market.

Market Performance

Here are how some other indexes and asset classes have performed as of this morning’s opening bell.

NYC Market Update

Here is a view of NYC market activity over the past week.

Mortgage Rate Update

The 30-year fixed-rate mortgage averaged 6.49% this week. Mortgage rates have not changed much recently, but economic growth and housing affordability continue to improve for homebuyers as they shop for homes in today’s market.

News You Can Use

• NYC Is Racing to Secure Unstable Midtown Manhattan Building Bloomberg

• Manhattan Luxury Real Estate Sales Hold Firm Despite Fears of a ‘Mamdani Effect’ CNBC

• Vacancy Rate of Rent-Stabilized NYC Apartments Is On the Rise NY Post

• New York City Hasn’t Built This Many Apartments Since 1965 Wall Street Journal

• Manhattan Office Leasing Sees Strongest Gains in 20 Years

• Top Federal Reserve Officials Back Kevin Warsh’s Rethink for Forward Guidance Financial Times

• Why Micron Is Betting Big on New York Chips Wall Street Journal

• Traders Are Most Positive on Dollar Since 2015 Bloomberg

• Hedge Funds Shake Off Brutal March for Best Half Since 2021 Bloomberg

• US Loses to Belgium in World Cup Bloomberg

• From Space Rocks to Smartwatches, AI Millionaires Rewrite Luxury Playbook Reuters

The Deep Insight

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