Why Did Low Inventory Remain During the Spring Selling Season?

The Weekly Recap

The debt deal is a done deal, avoiding default and the end of the world. The Fed is planning to skip a June hike (hooray!), but still wants to raise rates down the road (booo). Home-price declines may be over, an electric car was the best-selling car in America last quarter with the Tesla Model Y, speaking of Tesla, Elon met with the Chinese and said China and the US are ‘conjoined twins’. Consumer spending hit an all-time high last month and top AI CEO’s continue to weigh the risk of extinction. Bill Ackman wants Jamie ‘Daddy” Dimon to run for president and now that Succession is over, what am I supposed to do on Sundays?

Why Did Low Inventory Remain During the Spring Selling Season

It’s the time of year that every agent, investor, brokerage, Zillow stalker, homeowner and potential buyer waits for when it comes to real estate, and that is the Spring Selling Season. The time of year where a plethora of new inventory comes on the market giving buyers motivation to make the leap to purchase to become a first time homeowner or to upgrade their asset over the Spring and Summer months. This current market is proving to be an outlier.

First and foremost, there will always be a headwind for a perspective party on either side of a transaction, regardless of the overall market conditions. Real estate is a dynamic asset class that evolves. Whether its fear of recession, inflationary pressures, debt ceiling default, job security uncertainty, every cycle experiences something different.

What we’re seeing now is that high rates are continuing to keep buyers AND homeowners on the sidelines, especially in the sub $1.5mil market. The average person lives in their apartment 5-7 years in NYC, taking the latter group, someone who bought in May of 2016 had a rate of 3.57% according to Freddie Mac. If that individual were to sell their home and buy in this rate environment, they would be paying double for the same amount of money they borrowed 7 years ago.

Supply is being limited because the individuals who hold that supply are waiting for better buying conditions. Most people need to sell in order to buy their next home. If rising rates have created a higher barrier to entry for buyers, that would dictate that pricing would need to be lowered from sellers in order to meet what the market bears, so people are comfortable in holding onto their current homes which is why supply is low.

The ultra-luxury market, being $10 million and over is moving relatively at a normal pace. Global sales are up over 11% in the first quarter with New York reporting 58 total transactions over the $10 mil mark and sales transactions over $4 million are up 20% from April in Manhattan. The traders of these properties are not exposed to the same level of rate volatility that the retail consumer is.

Market Performance

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

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past week as well as newly signed contracts that have taken place over the last week vs the last month. Lots of declines to be expected with a long holiday weekend.

Past Week

Past Month

Mortgage Rate Update

Mortgage rates jumped this week, as a buoyant economy has prompted the market to price-in the likelihood of another Federal Reserve rate hike. Although there has been a steady flow of purchase demand around rates in the low to mid six percent range, that demand is likely to weaken as rates approach seven percent

News You Can Use

• US Debt Ceiling Bill Passes House with Broad Bipartisan Support Reuters

• Debt Limit Deal Clears Congress, Ending Threat of Debt Default Bloomberg

• Fed Prepared to Skip June Rate Rise but Hike Later Wall Street Journal

• Don’t Expect the Stock Markets to Rejoice About the Debt Ceiling Deal CNN

• Home Price Declines May Be Over, S&P Case-Shiller Says CNBC

• What the Credit Rating Agencies Are Saying About the U.S. Axios

• ETF Share of US Market Turnover Jumps to a Record 31% Financial Times

• What to Watch Out For in Friday’s Jobs Report for May CNBC

• US Seeks to Curb Investment in Chinese Chips, AI and Quantum Computing Reuters

• The Health of the Luxury Real Estate Market CNBC

• Here Are the Luxe Amenities that NYC Renters Can Live Without NY Post

• Default Wave Imminent, Will Peak in 2024, Deutsche Bank Says Reuters

• How Crypto id Dealing with the Debt Ceiling Turmoil CNN

• Bill Ackman Calls on JPMorgan CEO Dimon to Run for US President Reuters

• Top AI CEO’s, Experts Raise’ Risk of Extinction’ From AI Yahoo Finance

• Inside the Real-Life Homes of ‘Succession’ NY Post

The Deep Insight

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