The Ping Pong Of The Fed Raising Rates

March 11, 2022

The point here is – no matter how effective you’re opponent’s offense appears to be (inflation), never give up. Ping pong is not a great analogy but hey, I loved the video – wait for it!

And here’s a very illustrative way to account for all that extra rent you’re shelling out on the first of the month.

@crustylandlord

Rents due on the first

♬ original sound – Your landlord

But I digress…

The Fed Raises Rates With A Promise To Do That Six More Times In 2022

Well, it just happened. The FOMC Open Market Committee did their thing and rates ticked above 4%. I think this is a favorable development for the housing market. Although the Fed tried real hard in 2018 to do the same thing, this time, the economy is more robust and the changes reflect the current economic boom. For some reason, I remain skeptical they will be able to execute all six rate increases though if supply chain issues noticeably improve.

Does anyone really think there is a long term benefit to the housing market by having:

– a collapse of listing inventory?
– a 20% YOY rise in housing prices?
– more than half of sales going to bidding wars?
– a rapid reduction in affordability?
– spending all our free time cruising Zillow?

Low rates make housing less affordable in the long run and rates have been on a long downward trend.

Listing inventory has been obliterated by heavy sales volume due to low rates to the point where it has been keeping sales lower than they could have been.

Among Super Luxury Sales Markets Like Londongrad, Housing For Oligarchs Is Getting Awkward

While I’m not advocating that we ignore real property rights, I do admire their moxie.

In this WSJ piece: Goodbye Londongrad: Russian Oligarchs Put Pressure on U.K. Property Market:

Over the past two decades, London’s high-end property market was overrun by the global superrich led by Russian oligarchs who did so many big, brash deals that locals called the city Londongrad.

But now…

The government has introduced a raft of measures targeting the Russian elite. It has frozen all assets tied to multiple Russian oligarchs with mansions in the city, while some lawmakers have called for the government to seize and sell those homes. It shut down a visa program that gave wealthy foreigners a quick path to citizenship, and is introducing rules that make it harder for property buyers to stay anonymous, a feature that had been an attraction of London.

While Oligrachs don’t dominate U.S. sales above $50 million that I collect, they certainly enjoy a large presence near the top of the list. Here’s the latest update of U.S. residential closed sales at or above $50 million. It does look like those mega sales are off to a slow start in 2022 but it’s not clear yet whether 2022 will be a record year or more in the range of the past decade.

Kastle: Return To Work Severely Lags Return To Other Activities

Comparing activities to 2019, being in the office is severely lagging other aspects of life, just cracking the 40% threshold over pre-pandemic levels. And this has far-reaching implications for the home-work relationship, likely causing above-average churn as consumers and their employers try to figure it out. I have the sense I am going to be writing about this a lot over the next 3 to 5 years.

2022 Axios-Generation Lab Next Cities Index Does’t Rank The Sunbelt In Top 5 Destinations

This was a fascinating poll allowing a possible look out into the future the new inputs of remote work well underway.

Apparently, the news about the death of New York was premature (I can see that firsthand just by working there).

NY Fed Business Leaders Survey Shows A Strengthened Regional Future

I’ve been a respondent to the Business Leaders Survey survey for quite a while and have found it extremely helpful in gauging the regional economic outlook.

This month, perception of economic conditions (climate) are far more negative than reported conditions (activity). Perhaps more rose-colored glasses are called for, but unfortunately, they’re stuck on a cargo ship on the coast of San Diego. When focusing on business activity, the spring of 2021 was looking like a massive boom until Delta and then Omicron variants kicked in.

Via TikTok: What’s Inflation?

Getting Graphic

My favorite charts of the week of our own making

Seasonal residential leasing patterns in NYC are quite apparent:

My favorite charts of the week made by others

Len Kiefer‘s Chart Handiwork

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

I took a break this week but rest assured, with all the hearings and actions on the horizon, I’ll be back next week.

OFT (One Final Thought)

Looking forward in time is hard.

Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

– They’ll be more ping;
– You’ll be more pong;
– And I’ll paint the lightswitch.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog
@jonathanmiller

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