A Tale Of Two Markets By Leonard Steinberg

A Tale Of Two Markets By Leonard Steinberg

What happens on Wall Street often is mirrored by what happens in real estate markets. Right now we see some properties trading at big premiums, fast, and others languishing and seeing price cuts. Why is this?

Many assets increased in price, some more dramatically than others and sooner or later things are rebalanced. People always focus on the 'downs' while often forgetting the bigger 'ups'. One thing we all have to contend with is that the world has changed quite notably in the past 6 weeks.....and the biggest change is possibly the predictions around Fed interest rate cuts. Several weeks ago many believed we would see cuts starting around now, with several throughout the year, up to seven. Now the consensus is closer to 1- 2 cuts.....that is a massive shift in a relatively short period of time which leaves many a bit confused and some have taken one thing off the table: urgency. Some urgency to buy was instilled into markets when there was a mass belief that rates would come down and when they did many buyers on the sidelines would step in and buy. This is not happening ....yet.

When people saw the prospect of rates coming down they felt more confident that home prices would remain stable or even go up further. Now that people anticipate rates staying the same or possibly even inching higher, a new fear has resurfaced that this could fuel home price declines to allow buyers to offset higher rates with lower home prices. The only thing that prevents this from accelerating is low inventory, although there are signs of that changing as well, more notably in some areas where demand has waned or lots has been built.

In the economy in general, there are two markets as well:  those with hard assets like (mostly residential) real estate and stocks have fared extremely well with both up double digits in the past few years: The DOW is up 35% since January 1, 2020 and the S+P 500 is up 58%! However, inflation has eroded the buying power of many without hard assets - that help to weather inflation - and only recently do we see wages catching up. More rebalancing. The story of the haves and have-nots is as old as time. These days it's amplified in all things.


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