Resiliency of the Economy and NYC Housing Market

The Weekly Recap

Our Fed overlord J Pow said the Fed has not yet decided on the size of its next rate hike but that they are coming, US manufacturing growth is outpacing the world, BlackRock jumps on the Jamie Dimon train and believes the Fed could raise rates to 6%, eurozone Q4 GDP growth was revised down to 0%. Home prices fell YoY for the first time in a decade, the NY Fed declared that global supply chains have 'returned to normal' and Biden is trying to raise taxes and continue to spend a ton more money in the latest budget proposal from the White House.

Resiliency of the Economy and NYC Housing Market

The incredible rate at which the Federal Reserve has raised interest rates for the first time in over 40 years has been a remarkable feat of determination, systemic malleability and the incredible, enduring strength of US markets and the economy overall.

For all the fears of recession and the end of the market economy as we know it, the resiliency that's been exhibited should give the Federal Reserve pause about how ineffective their rate hikes have been as it pertains to quelling inflation and continuing down the road of quantitative tightening that creates fears for everyday Americans.

Here are some signs that the American Economy, and the New York Real Estate Market are not just surviving, but getting ready to thrive:

The Economy: It is as robust as ever running 'white hot', and with an unemployment rate running at a five-decade low, inflation is still far above the Fed's goals. Something strange is occurring when the Fed tightens rates as much as they have and it has had little achievement in terms of bringing down demand. Across the broad swath of the economy consumer demand and overall hiring have remained extraordinarily healthy. Powell believes that the strong labor market and excess demand in the space coincides with households who have stronger savings thanks to the pandemic. "It may take time, patience and resolve" which is a nice way of saying, he doesn't have a clue.

Manufacturing: The US is outpacing the rest of the world in Manufacturing. When the hell was the last time you heard that? Thanks to a leg up due to China's Zero Covid policy, and the war in Ukraine; the production of renewable energy equipment as well as with an uptick in oil exports to meet global demand and the domestic production of pharmaceuticals i.e. US based/created vaccines. The Atlantic Council GeoEconomics Center stated that 'while the rest of the world grew a little, the US surged'.

GDP Growth: While the rest of the world's GDP is shrinking or not even growing at all (see the eurozone 4th quarter GDP being revised down to 0%), the US GDP was 2.7% in the 4th quarter of 2022.

Private Lending: The spate of recent rate hikes has created an opening for private credit players to edge out big banks in loan financing deals. Some $40 billion of difficult to offload  corporate debt is a major reason why US banks scaled back their lending products last year. The ultra low rate environments left private equity firms fat with more capital than they could know what to do with, making private credit alluring. Companies like Blackstone, Apollo and Ares are writing massive checks to help the M&A activity. (Thanks Daily Upside)

Real Estate Market: The NYC real estate market is finally back at an equilibrium between buyers and sellers with UrbanDigs Analytics considering the market to be neutral. Month over month inventory in NYC is up 13%, signed contracts are up 48% and units coming off the market that did not sell is down 17%. All signs that point to the spring selling season coming back into effect and the disruption of the real estate market cycles due to covid uncertainty has re-regulated itself.

Market Performance

Here are how some other asset classes performed this week as of this mornings opening bell. 

NYC Market Update

A new weekly section! Here is a week over week view of new inventory that has come onto the NYC market as well as newly signed contracts that have taken place. The spring selling season is upon us as of 3/9/2023

Mortgage Rate Update

Mortgage rates continue their upward trajectory as the Federal Reserve signals a more aggressive stance on monetary policy. Overall, consumers are spending in sectors that are not interest rate sensitive, such as travel and dining out. However, rate sensitive sectors, such as housing, continue to be adversely affected. As a result, would-be homebuyers continue to face the compounding challenges of affordability.

News You Can Use

• Fed's Jerome Powell Says Data Will Determine Size of Next Rate Increase WSJ

• Jay Powell Warns Fed if Prepared to Return to Bigger Interest Rate Rises Financial Times

• Powell Changed Everything on the Markets View in Just a Few Minutes CNBC

• US Manufacturing Growth Outpaces the Rest of the World Axios

• Biden Unveils Budget Plan AP

• There's a Silver Lining for Mortgage Companies in a Bleak Market WSJ

• There's No Exit Ramp for Fed's Powell Until He Creates a Recession CNBC

• Theories For Why Rate Hikes Pack Less Punch Axios

• 'A Mild Recession is Possible'- Jamie Dimon CNN

• Eurozone Economic Growth Revised Down to 0% Reuters

• US Imports, Exports Grew in January, Adding Signs of Solid Global Economy WSJ

• BlackRock sees 'reasonable chance' of Fed Raising Rates to 6% Reuters

• Housing Market Momentum Stalls WSJ

• Why Rate Hikes Haven't Affected the Economy More Axios

• Home Prices Fall YoY for First Time Since 2012 Axios

The Deep Insight

 Puppy of the Week

The puppy of the week this week is Bonnie! Bonnie is a 3 year old Morkie who loves love. She is indeed a princess who enjoys leisurely days in Battery Park and going out for a good dinner. Her favorite spot is Liberty Bistro where she loves the Atlantic Salmon Entree. Don't let her sophisticat look and hobbies fool you, Bonnie enjoys rolling in the mud and hunting small birds just as much as the next dog. Bask in the glory of Bonnie!

Contact Me

Feel free to reach out to discuss more in-depth about your real estate goals, share your thoughts about my newsletter, or lobby me to have your dog featured as the dog of the week in my monthly newsletter. Looking forward to hearing from you!