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Americas Has a Housing Crisis
Real Estate Rundown December 14th
Thomas Moran
December 14, 2023
Market Pulse
Manhattan's luxury real estate market, with its 23 transactions last week, demonstrated once again its robust and diverse nature. In the Upper East Side, there were seven transactions, predominantly co-ops, reflecting the area's preference for classic, upscale living. The Upper West Side, known for its diverse architectural charm, presented a mix of three co-ops, a condo, and a townhouse among its five sales, showcasing the varied tastes of its residents. In Midtown, synonymous with contemporary urban living, two condo sales highlighted the appeal of modern, high-rise lifestyles. Downtown, where the energy of New York converges with a blend of historic and modern vibes, led the way with nine transactions. Dominating these were condos, alongside one condop and a townhouse, indicating a demand for both trendy and distinctive properties. This variety in transactions across Manhattan's different neighborhoods not only underscores the wide array of luxury properties available but also reinforces the strength and vitality of its real estate market. Despite varying market trends, Manhattan continues to attract a wide range of buyers. This sustained activity across these areas is a testament to the enduring appeal of Manhattan's real estate market.
Miller Samuel
Top Sale
Curbed
The top sale in Manhattan last week was a luxurious townhouse at 135 West 11th Street, with an asking price of $32 million, the seller originally purchased the property in 2019 for $21,894,506. This impressive 5-story property boasts 6,998 square feet, featuring five bedrooms, five bathrooms, three powder rooms, and two fireplaces. It also includes an elevator, adding to its luxury appeal. The townhouse offers substantial outdoor space, with a 462-square-foot patio/garden and two terraces on the top floor, providing a rare blend of indoor and outdoor living in the heart of Manhattan. Located in The Greenwich Lane, a prestigious 5-building complex, this townhouse is part of an exclusive community comprising 193 condos and 5 townhouses. Residents benefit from a range of high-end amenities including a concierge, doorman, parking facilities, a fitness center, a 25-meter swimming pool, a golf simulator, a communal garden, a residents' lounge, and a children's playroom. These features underscore the property's appeal to high-net-worth individuals seeking a blend of luxury, convenience, and community.
Americas Has a Housing Crisis
CNBC
The housing crisis in America, characterized by skyrocketing home prices and surging interest rates, is profoundly impacting the nation's economic landscape. Home prices have reached unprecedented highs, This has significantly eroded the purchasing power of the average American, with home prices now less affordable relative to income and mortgage rates than at any point since the 2006 housing bubble. This situation is exacerbated by a dramatic 40% increase in home prices during the pandemic, coupled with the Federal Reserve's aggressive monetary policy leading to the highest mortgage rates seen in recent history.
In response, President Biden's administration has unveiled the Neighborhood Homes Investment Act, aiming to promote homeownership for an additional 500,000 households. This act introduces a federal tax credit for the development and renovation of housing units in distressed neighborhoods, with the potential to aid 500,000 households and generate $125 billion in development revenue over a decade. Furthermore, the plan includes zoning reforms and low-cost loans to encourage affordable housing development near transportation hubs, alongside initiatives to reduce mortgage insurance premiums and introduce down payment assistance programs, specifically targeting first-time and first-generation homebuyers.
However, these measures, while intended to provide relief, may inadvertently contribute to further economic strain. The heavy reliance on government intervention and financial support, particularly through tax credits and assistance programs, risks perpetuating a cycle of dependence on federal aid. This approach exemplifies the pitfalls of “Bidenomics” – resolving a crisis rooted in unchecked spending and financial aid with more of the same. Such strategy risks exacerbating inflationary pressures and increasing living costs, thereby deepening the affordability crisis.
This plan also overlooks the growing trend of large corporations buying up residential properties and renting them at inflated prices, a significant factor in the housing affordability crisis. The lack of measures to curb corporate ownership of single-family housing could lead to a market where affordable homes remain elusive for average Americans, despite increased government spending.
First-time homebuyers and current homeowners face formidable challenges in the current market conditions. The reintroduction of student debt payments, combined with the lock-in effect of low mortgage rates during the pandemic, has made mobility and upgrading extremely challenging. Additionally, the market is further complicated by a severe supply shortage, aggravated by corporate acquisition of residential properties, a critical issue the plan does not directly address.
The Biden administration's housing plan, while a step towards addressing the immediate challenges in the housing market, may lead to further economic imbalances in the long term. The strategy's focus on expansive government spending and assistance, without a comprehensive approach to tackle the underlying causes of the housing crisis, risks being a temporary fix with potential long-term adverse economic consequences. Sustainable, long-term solutions that address the core issues of supply and demand, as well as corporate ownership of housing, are imperative to genuinely resolve the housing affordability crisis.
The FED Shows Cautious Optimism
Bloomberg
In the most recent meeting, the Federal Reserve signaled a significant shift in its monetary policy outlook. Maintaining interest rates steady for the third consecutive meeting, the Fed laid the groundwork for potential rate cuts next year, a move reflecting the easing of inflation and a shift in economic focus.
Fed Chair Jerome Powell, while not ruling out further hikes, indicated that the focus is now shifting towards when to reduce rates as inflation continues its descent towards their 2% target. The quarterly projections revealed an expectation to lower rates by 75 basis points next year, with the federal funds rate projected to be around 4.6% at the end of 2024. However, Powell emphasized that these projections are not set in stone and that the Fed remains vigilant against resurgent price pressures.
A notable change in the Fed's post-meeting statement also indicated this new direction. The statement was adjusted to assess if any additional policy firming is needed, a departure from the tone set in November. The committee acknowledged that inflation has eased over the past year, but still regarded the risks to inflation and price growth as broadly balanced.
Updated forecasts showed lower inflation predictions for this year and next, with the Federal Reserve expecting inflation to increase 2.4% in 2024. Economic growth projections were also slightly lowered. Looking ahead to 2025, policymakers anticipate further reductions in the fed funds rate, ending the year at around 3.6%.
Zillow
This pivot follows a series of aggressive rate hikes totaling 5.25 percentage points, marking a significant slowdown in the monetary tightening process. The recent pullback in Treasury yields, erasing much of the increases seen throughout the year, suggests a lessening need for further rate hikes. This reversal is already impacting the economy, evident in lower mortgage rates facilitating home purchases and cheaper borrowing costs for companies. Powell's latest comments suggest a departure from his stance less than two weeks prior, indicating a more cautious approach to rate hikes in the upcoming quarter. He cautioned that it would be premature to confidently declare that a sufficiently restrictive policy stance has been achieved
Pick Of The Week
For those of you who might not know, beyond the bustling world of real estate, I'm quite the NFL fan! As we dive deeper into the season, I thought, why not sprinkle a little fun into our newsletter? Every week, I'll share my "Pick of the Week" for sports betting. While my expertise is firmly in real estate, I think this will be an enjoyable twist for our readers. But remember, it's all in good fun and purely for entertainment – always wager responsibly!
After a couple of bad picks, it’s clear we’re due for a big win. Dallas is riding high after a statement win against Philadelphia, but I see the Bills as the sharp play here. With the nation likely backing Dallas at plus money, I love the Bills in this spot. In a high-stakes, late December home game with the playoffs on the line, I'm putting my hard-earned coin on Josh Allen to take down the Dallas Cowboys. This is more than just a game; it’s a moment for the Bills to shine. Let’s buckle up and enjoy the ride.
Bills -130 vs Cowboys
Record 7-4
Bonus Future Pick: Buffalo Bills AFC Champion at +1,000: Doubling down on the Bills, I'm adding an exciting future pick with Buffalo as AFC Champions. As an avid Bills hater it pains me to say this, but Buffalo can beat any team in the AFC, and I can easily see them making a late-season run. Despite being a bit late to the party, as their odds have dropped from 18 to 1 to 10 to 1 after their win against the Chiefs, the Bills at +1,000 still offer tremendous value. Two games behind Miami in the AFC East and facing a challenging schedule, if the Bills can run the table, they could emerge as one of the hottest teams in the postseason. While there are concerns about Josh Allen's late-game performances, the potential value at these odds is too good to overlook. Although its far from over, We sniped Alabama while they were on the outside looking in and now I look to do the same with the Bills.
Bonus: Bills to win AFC +1,000
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