What is the Impact of the Recent Economic Volatility on the Overall Outlook?

The Weekly Recap

Good morning and happy Friday! The Fed’s preferred inflation rate slowed to 2.8%, rents for Manhattan apartments hit another record high as bidding wars are starting to take over. The population in NYC keeps growing as more and more NYC rentals are coming with Washer/Dryers in units averaging a 12% premium. Household net worth in the US hit a record high at the end of 2024 and Greenland is officially in a love triangle with the US, Denmark and its own independence.

If you missed last weeks newsletter How is Return to Office Impacting the Residential Real Estate Market, you can read that through the link.

What is the Impact of the Recent Economic Volatility on the Overall Outlook?

While volatility in the stock market may cause concern for some, stability in the rate markets has fostered a strong sense of certainty for buyers looking to enter the real estate market. With interest rates maintaining a relatively consistent range and avoiding drastic month-over-month fluctuations, consumers are now in a better position to plan their short- to medium-term financial futures with greater confidence. This predictability reduces hesitation among buyers who, in previous volatile rate environments, may have opted to wait for more favorable conditions. Now, with stability in borrowing costs, buyers can make more informed decisions and lock in rates that align with their long-term investment strategies.

There are still broader economic factors that are playing a role in shaping market sentiment. The ongoing discussion surrounding tariffs has introduced an element of uncertainty, particularly among homebuilders and certain investor groups. While some may perceive tariffs as a direct threat to construction costs and overall market dynamics, the administration’s historical approach suggests that tariffs are often used as a negotiating tool rather than a guaranteed policy implementation. While concerns exist, the full impact on housing development and investment remains speculative.

Despite housing numbers and pending contracts showing declines on a national scale in January and February, it is important to contextualize this slowdown. A significant factor behind the dip in activity has been the extreme weather conditions experienced across large portions of the United States during this period. These environmental challenges temporarily cooled the momentum seen in December, disrupting transaction timelines and lessening buyer activity. This seasonal downturn is not indicative of a fundamental market shift, and as we transition into the spring selling season, we can anticipate a resurgence in activity.

With increased demand expected in the coming months, the dynamics of limited inventory could drive prices higher in certain markets, particularly those facing constrained supply. As buyers re-enter the market and competition intensifies, we can expect both for buyers looking to secure favorable terms and for sellers aiming to capitalize on demand. The combination of stable rates, seasonal demand, and market resilience suggests a promising outlook as we move further into the year.

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 new inventory that has come onto the NYC market over the past WEEK as well as newly signed contracts in Manhattan.

Mortgage Rate Update

Despite the volatility in the markets this week, the 30-year fixed-rate mortgage remained relatively flat from last week. Mortgage rates have moved lower each of the previous seven weeks which has provided the housing market with a positive response from homebuyers. Purchase applications are up 5% YoY. The combination of modestly lower mortgage rates and improving inventory is a positive sign for homebuyers in the upcoming spring home buying season.

News You Can Use

• Manhattan Apartment Rents Jump to Record as Bidding Wars Spread Bloomberg

• Inflation Rate Eased to 2.8% in February CNBC

• US Household Net Worth to Record at End of 2024 Bloomberg

• New York City’s Population is Growing Again Bloomberg

• Thinking Again About Midtown South, NYC’s New Plan Is a Mass of Contradictions Manhattan Institute

• SALT Increase Gets Boost From House Freedom Caucus Leader Bloomberg

• US Homebuyers Confront a New Wild Card this Year Bloomberg

• Treasury Secretary Bessent says the Economy Could Be ‘Starting to Roll a Little Bit’ CNBC

• Fed Chair Powell Signals Possible Tweaks to ‘Dot Plot’ Rate-Path Forecasts Reuters

• The Best Week of the Year to Sell Your Home is Coming Up NY Post

• More NYC Apartments Now Have Washer-Dryers. Is it Worth the Extra Cost? Gothamist

• Greenland Caught In a Love Triangle Between Denmark, the US and It’s Own Independence CNBC

The Deep Insight

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