Are We Seeing a 'Potential Rally' in the Housing Market?

The Weekly Recap

The June inflation report was lower than what investors expected coming in at 3% YoY, a number not seen since March 2021. Yield curves are still signaling inflation but some analysts are starting to think its wrong. An economist sees potential rally in the housing market, NYC investment firms are snagging Hamptons properties, Fed officials want tougher rules for large banks and think higher rates are needed to get to 2% inflation. Elon is doing more things and launched his own AI company called xAI, remote work continues to kill office values and no matter how hard Ukraine tries, NATO keeps giving them the ol’ Heisman on membership.

Are We Seeing a ‘Potential Rally’ in the Housing Market?

Everyone hopes and wishes for rally’s in the housing market as it creates deeper confidence in the overall economy and a sense of comfort knowing that as a homeowner, your asset is performing and appreciating. With new construction and development trending upwards, sales of those new homes increasing and seeing a moderate recovery in overall home prices, it is enough for at least one economist to define that the market has bottomed out.

In an interview with Yahoo Finance, Brad Dillman, Chief Economist at Cortlandt, thinks we are heading for such a rally saying “It appears to me that after about a year of some slowdown in general, housing activity and disinflation and home prices, we’re now seeing a floor and then a potential rally.”

In low inventory, re-sale environments, what drives massive rebounds in the market place is led by new construction. Creating inventory where none exists and selling without the constraints of having purchased with lower rates years ago. US Census Bureau data shows that new home purchases are up 12% since last month and 20% YoY.

New homes that are priced correctly and are deemed desirable coming to the market now are selling within 30 days with some instances of bidding wars driving prices up. Those behaviors lead to believe that overall, buyers have come to grips with the reality of high interest rates just being a part of life. It is more advantageous to buy in a high rate environment when prices are push down because of it, than buy in a low rate environment when prices are then pushed upward with an increase supply of buyers.

With the low CPI number of 3% and even with the Fed expected to raise interest rates at least one more time, the report, according to Mark Zandi, chief economist at Moody’s Analytics, “makes a strong case that inflation is headed back into the bottle.” Praise be to Jerome Powell.

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 in Manhattan.

Mortgage Rate Update

Mortgage rates increased to their highest level since November 2022, the last time rates broke seven percent. Incoming data suggest that inflation is softening, falling to its lowest annual rate in more than two years. However, increases in housing costs, which account for a large share of inflation, remain stubbornly high, mainly due to low inventory relative to demand.

News You Can Use

• Inflation Eased to 3% in June, Slowest Pace in More Than Two Years

• Fed Officials Say Higher Interest Rates Are Needed to Reach 2% Inflation Goal Bloomberg

• Here’s The Inflation Breakdown for June, In One Chart CNBC

• US is Top Investment Destination Despite Falling Inflows Wall Street Journal

• With Inflation In Retreat, Stocks Hit 2023 Highs Axios

• Powell Haunted by Repo Crisis as Fed Aims to Cut Balance Sheet Bloomberg

• The Luxury Tower Built for NYC’s Elite Still Sits Half Empty Wall Street Journal

• Top Fed Official Recommends Tougher Rules for Large Banks Axios

• Banks Rush to Lock in Cheap Funding With Records Sales of Ultra-Safe Debt Financial Times

• America’s Biggest Banks are Going to Need More Capital Wall Street Journal

• How Higher Rates Are Changing the Corporate Bond Market Axios

• Americans Prepare for Tighter Budgets as Student Loan Payments Resume Bloomberg

• Biden and NATO to Offer Support for Ukraine, Not Membership Reuters

The Deep Insight

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