Why are Manhattan rents so strong?

https://www.manhattan-institute.org/kober-new-york-city-2020-census-data

I've been beating the drum pretty consistently on this: there are a LOT of people who have HHI > $500K in this city. One fortieth of that is $12,500 a month.

If the people who have the capability to pay that (yes, yes, i know they don't want to, and yes, yes, I know that they are "barely meeting ends meet" after saving for retirement and paying for private school) all have to be in the office 3 days a week, or think that for purposes of their careers they should be, they're going to bid up 2 and 3 bedroom apartments in convenient-to-them neighborhoods.

It's not supply and demand citywide, it's supply and demand in whatever your competitive set/cohort happens to be. And that's not "stimulus funds," -- that's law firms, some businesses, and some finance firms making out like bandits during Covid.

I had clients who were interested in a 2 BR that would take dogs downtown (in my clients' case, for a pied-à-terre) and the one that was priced at $8K got 15 applications, ended up going for ~$10K.

ali r.
{downtown realty}

- There is no exact survey of 2021 and 2022 change. Everything is just estimates which for 2010-20 proved to be wrong.
- It is very hard to tell in which segments did the population decrease if it indeed happened.
- Did people opt for more space? Think Brooklyn townhouse now being used by one family vs 3 families sharing it as an extreme example.
- How many people supposedly moved out the city for tax purposes but kept a rental in the city?
- Was too little basic doorman compact rentals/condos built in the last 10 years without fancy amenities and high-end finishes? Seems so as evident by glut of inventory at high-end in condos.

Everyone coming back to Manhattan at the same time, higher mortgage rates making home purchase less of an option too. This is the result of huge dislocations in the housing market and like everything else will take some time to work itself out . Labor market is strong too so there's money out there.

Also, in the highly desirable areas, there has not been much new inventory as everything is already built up. In lesser areas, there are still deals to be had. And let us not forget the inflation effect and temporary covid dip which makes the YOY increases look astronomical.

Asking rent less than 2013 https://streeteasy.com/building/sutton-57/rental/3878567

These are all helpful. If I (try) to summarize thus far:
* Odds are that more people want to live in Manhattan than before, for whatever reason that may be / despite the higher COLA
* Supply also hasn't kept up with greater demand to live here
* People are wealthier today than before. They can pay more rent/COLA than before
* There has been supply absorption as WFH look for more space/occupant
* More people push themselves to the 40x multiplier than I can wrap my head around
* Very recent spike in mortgage rates creates more demand from renters

Out of all of this, it seems I was perhaps most blind to the wealth effect and the WFH supply absorption. There should be personal income tax collection by zip code/borough somewhere to prove that out? I'm guessing we don't have 2021 #s out yet.

These are HUGE numbers in personal income tax collections.

At the state level: 2009 was $28BN of witholding, 2017 was $38BN of witholding, 2019 was $41BN of witholding and 2020 saw a whopping $43BN of witholding.
https://www.tax.ny.gov/research/collections/fy_collections_stat_report/2019_2020_annual_statistical_report_of_ny_state_tax_collections.htm

Haven't found the city level data, and theoretically, withholdings should be known/reported for 2021. But this press release suggests 2021 was gangbusters versus 2020 and prior years.
https://www.osc.state.ny.us/press/releases/2022/04/dinapoli-state-fiscal-year-2021-22-tax-revenues-33-billion-over-final-projections

https://comptroller.nyc.gov/reports/popular-annual-financial-reports/
Personal Income taxes
FY 2021 $15.8bn vs $13.7 previous year.

Page 10 for previous years. So
https://comptroller.nyc.gov/wp-content/uploads/documents/Popular_Annual_Financial_Report_2019.pdf

Color on FY 2022 (FY is July to June)

"Wages and Wall Street Profits
Average wages earned in the City have grown significantly over the past two years, increasing by 18 percent overall in the third quarter of 2021 compared with the same period in 2019. Increases in average wages have occurred in both high- and low-paying sectors.

High-paying sectors such as finance and information experienced the strongest overall gains, as shown below. Wages in finance have been boosted by the profitability of Wall Street firms which had a near record year of profits of $58 billion in 2021, falling short only of the $61 billion record in 2009. The strong gains in finance were outpaced by increases in tech-related sectors such as information. Anecdotal reports suggest that the finance and tech sectors are increasingly engaged in wage competition to retain and recruit top talent."

https://comptroller.nyc.gov/reports/comments-on-new-york-citys-executive-budget-for-fiscal-year-2023-and-financial-plan-for-fiscal-years-2022-2026/

If I were to pick two factors, I would pick
- Increased incomes driven by top 10% of New Yorkers and a lack of mid-end rental construction in popular areas of Manhattan offset by increased popularity of Brooklyn.

Population data is too broad and inaccurate to draw any meaningful conclusions.

Another example of rents barely keeping up with inflation in the last 9 years despite recent increase.

https://streeteasy.com/building/aire-200-west-67th-street-new_york/35a

https://streeteasy.com/building/tower-67/33d

CHIP holding 43,000 Rent Stabilized apartments hostage isn't helping. I can't tell you how many non-stabilized units are still being held off market to push up prices but I can tell you it's still happening.

Also reports are the majority of tenants signing new leases are moving in from outside NYC to new jobs.

BTW re:NYC budget:
Final Bloomberg budget $68.7 billion.
First Adams budget $101 billion.

You think the difference is coming from income taxes on high wage earners?

The phenomenon is pretty national and likely tied to inflation in goods => wages => services => rents like everywhere else.

In terms of how Manhattan might be different from the national picture, WoodsidePaul (I think) had an interesting observation of “musical chairs” in Manhattan. During the pandemic, a bunch of people left. That made prices drop drastically, which attracted new entrants and upgrades. I personally had no underlying demand to upgrade, but I did it for hoots: the deals were too good to pass up for me. Eventually, the people who left came back. But I’m sitting in their “chair”, one that is kinda ridiculous for me to have taken, but now that I’m sitting down I am comfortable and don’t really feel like getting up.

What would make me get up? Not a whole lot. Personally, I spend little of my income / investment gains / wealth. The gangbusters 2020, 2021, and now 2022 I’ve had don’t really help either. Looking more broadly at the population, a large number of people had gangbusters 2020 & 2021, by whatever metric they use to assess their finances. 2022 and beyond isn’t looking so hot so far, nor is the outlook over the next couple of years. However, people don’t cut spending in anticipation; rather, spending cuts tend to be reactionary and with a lag, usually driven by “running out of money” according to whatever metric an individual defines it for themselves.

Ask yourself this: what would make you cut your spending, downgrade? Multiply that by oodles of people.

FWIW, I am seeing pockets of reduced spendings / considerations thereof starting, in the form of cutting on underutilized rented homes. And substantially increased inventory at the highest ends of the rental bracket.

We're cutting back. Last year was gangbusters, income & investments. We did a complete gut renovation of our house including adding a master bedroom 2 weeks in eleuthera, 2 weeks skiing and Switzerland.

That's not happening this year. I used points to fly and stay at a resort in the Bahamas. Next week we're taking a 10-day road trip (we have an electric car).

We had a flurry of activity this week, slammed. Accepted offer on our UES listing, another one of our listings went into contract in Brooklyn heights. And we currently have five accepted offers working their way through due diligence. 10 days ago I didn't see that coming!

Our deal volume is probably down 30-40% from last year.

Keith
TBG

Out in Nowhere the market has stopped. It was very sudden. In March stuff was going for 10% over crazy asks and nearly triple the 2020 bottom. I monitor about 35 properties that are on the market, and none has gone into contract in the last 2 months. Properties that would have had 100 saves on Zillow now are lucky to get 20. Ditto on rentals. Lots of people trying to get out of their rentals.

Is this a market that has a lot of second home buyers / vacation-iness, George? I ask because I’ve heard talk of the Hamptons rental market being in a glut, but everywhere else in primary home markets I hear about rental bidding wars and whatnot. And what does “trying to get out of their rentals” mean, breaking their lease? Where are they going to?

Anecdotal stories from NYT about the top end of the rental market, which feels about 6 months (?) behind the sales market w.r.t. the cycle. The opening listing in the article seems emblematic of sloppy transactions from people who find / have forced themselves into a corner.

https://www.nytimes.com/2022/06/22/realestate/top-nyc-rents-brooklyn.html?unlocked_article_code=AAAAAAAAAAAAAAAACEIPuomT1JKd6J17Vw1cRCfTTMQmqxCdw_PIxftm3iWka3DLDmwYiP4YCoyN4FvEeacke9wrmjKKT5pbPbkzX7l41OhYPEh8TU-ovp6A0twjEhkClLiSDCkwzo6fGvcx6yPrZW20b7YnnLTv5BuKdTPqUPfA1SYkIBJu9sExaVz62XxYzqmVQrFy2MJsnqt0XuAMTjoHYCiLvfDjGk8-bI3ANkeAn1FwD-JJWjjTnsqe7KYAdmhRCFHHTnB56QUs-Y8WeYNXbOukcUlWKIepiq4RC2doMI6sG5Y0IoDWnL9rurPGwgee_-Fg2r2iQdEaokiMnE-MAg&smid=url-share

Bidding up $40K/mo for this crap has me shaking my head:

https://streeteasy.com/building/67-livingston-street-brooklyn/ph

Note 2020 ask at $15K/mo:

https://streeteasy.com/rental/3065324

NYT>> Downtown, the Jenga-like building at 56 Leonard now has one rental apartment available, a three-bedroom for $28,500 a month, according to StreetEasy. Ten other units, with rents ranging from nearly $9,000 to $35,000, were rented out earlier this year, according to the site.

For yutz, I calculated the average time on market at 2 weeks…

Only 4 saves on SE.

A family we know from school bought a house site unseen in Palm Beach County, out west in true now where. 2000 homes, fake farm theme. They bought there because they were priced out of prime coastal areas of PBC.

They had immediate regret, it's a 45 minute commute to school and work and there is nothing around it. (Just sold a house in Ohio to move to Florida.) Now they are scrambling to sell, never moved in. No takers, very quiet. They said the market turned against them very quickly about a month ago. It went from active sales to just about nothing trading.

I am hearing prime PBC is also very slow, but inventory remains pretty tight. May also be seasonality, summer slowdown.

I recently heard a story about (former) neighbors who moved to Florida during the pandemic, personally and professionally (i.e., moving their business). They went to Palm Beach, simply because their understanding was “That’s where rich people live in Florida”. I’ve been to Palm Beach exactly once in my life, for dinner. I found it comedically entertaining, in the style of Bravo reality shows about “rich” people, and it was pretty clear that it was not my scene. You couldn’t pay me enough to live there. Unfortunately, this family didn’t figure it out until they bought a fancy place there. They’re now looking to move to Miami, but it’s much more difficult because the fancy places at those of price points are less common in Miami / all swooped up.

I was in Miami recently. Conversation we had at the beachfront bar at the Setai in South Beach, with a curious woman sitting next to me:

Woman>> Where are you guys from?

Inonada>> NYC

Woman>> Are you moving to Miami?

Inonada>> No, just here for the weekend.

Woman>> Because a LOT of NYers have move to Miami, it’s crazy.

Inonada>> Yeah, we’ve heard.

Woman>> LOTS! Joe over there is from Miami.

Inonada>> *knods*

Woman>> So what, are you just here to test it out, because you are thinking about moving to Miami?

Inonada>> (A polite version of) NO, we’re here for some friggin’ sun and have no interest in moving to Miami. We are tourists in what I understand to be the Times Square of Miami, have you never heard of NYers coming down to South Beach for just a trip before?

Keith, what’s driving you to cut spending?

Yes, Palm Beach is not for everyone, and I certainly could not see you living there nada! It's nice for an occasional dinner, or a stroll down Worth Avenue or visit to the four arts societys gardens.

El Cid and Flamingo Park in West Palm Beach are interesting neighborhoods with some very beautiful homes. Besides being near the designer and antique shops, you're close to the Norton art museum, and recently there are some decent restaurants that have sprung up in the area. Including a fun bakery/cafe called hive.

You need a major mindset change if you're going to move from New York City to South Florida. The other option for the affluent would be Jupiter Island, a beautiful stretch of Beach and an exclusive little golf course up near Hobe sound. Then of course you have all the large gated communities in the northern Palm Beaches in Jupiter and Palm Beach gardens. Definitely not my cup of tea, but it does appeal to some, and many of them are filled with x New Yorkers who want all the pomp and circumstance of an exclusive gated community and country club: Bears club, old Palm, Ibis, Trump National (former Ritz Carlton) Admirals landing to name a few. Of course there's also dozens of other gated communities if you want to give the appearance of being wealthy : )

Then you have those who want to just live in a quiet Beach town in the northern Palm Beaches, like North Palm Beach, Jupiter and Juno. Here people are buying old 2000 square foot homes that were built in the 60s, the ones located on canals or lagoons and building absolute monstrosities, to the point where the towns have had to address this through building code. But you get your 5,000 plus square foot house right on the water in quaint Beach town, these are 5-8mm.

Then of course you also have lost tree in North Palm Beach, a community Jack Nicklaus calls home. And the under the radar Seminole country club on US1 in North Palm Beach, where homes start at about 40 million. Florida is an interesting place though, right across US 1 there's a trailer park, an extremely well located trailer park!

I personally find Miami much more housewives style than Palm Beach, we were recently at Baha Mar and they interrupted my daughter's fun at the water park by taking over for filming, housewives of Miami. What a crew that was! There's so much traffic in Miami, the flooding is awful after even a small rainstorm, and the housing density rate is insane. Perhaps tell your friends to check out Coconut Grove, I call it the Brooklyn of Miami.

It looks like 67 Livingston St has quietly abandoned their Condominium plan. No sales in "the hottest condo market Brooklyn has ever seen," website reduced to just a splash page https://67livingstonst.com/availability-brooklyn-heights-apartments/
everything for rent. I wonder if they will officially file or try to pretend it's a condominium for a while. I wonder what the leases the are writing say?

Can you blame them? The apts they were trying to sell for $2M for years, to no avail:

https://streeteasy.com/building/67-livingston-street-brooklyn/10

We’re being snapped up quickly at $12K/mo rent:

https://streeteasy.com/rental/3827177

And then a couple of patrons show up and bid the rent up to $40K/mo on what looks to be a $5M ask apt.

But someone underwrote it - you have to wonder how many other projects out there are similarly situated. There are a ton of small condo buildings in the pipeline in Brooklyn. And with rates up it's going to get a lot harder for smaller developers to white knuckle it while praying for the market to go up to the point where their aspirational numbers pencil. Some of the biggest developer suckouts in NYC history didn't need a market crash - just for prices to stop rising (eg MJ Raynes).

I’m don’t follow what you’re saying, 30yrs. In late 2018, they thought they had a $68M sellout condo. Clearly, that didn’t take. By 2020, the briefly considered it as a $60M sellout condo but quickly shifted to renting, at unsustainable rents as a stopgap measure in all likelihood. But now, for whatever reason, their rents have exploded. They think they can achieve $4M annual rent with $600K in cc+tax expenses. Maybe this can be sustained, maybe it can’t. But even if the developer doesn’t want to hang onto it, doesn’t some REIT come along who believing the story and pay $68M on a 5% cap rate calculation?

300, what do you think is driving that income growth? Sustainable or does it now reverse? I'm seeing so many news articles - anecdotal ones - that talk about how consumers need to cut back on spending due to higher rents (not just NYC). it's as if suddenly there is a national housing shortage or suddenly everyone is willing to pay 10% more for the same thing.

Mouse,
It is hard to predict future income growth in NYC for the small segment of population we are talking about.

Nationally, it seems people decided to consume more house in the last couple of year. WFH? Less avenues to spend money elsewhere.

Labor market is incredibly tight. So if fed is able to engineer higher unemployment, wage growth in notional terms will slow down.

>> It is hard to predict future income growth in NYC for the small segment of population we are talking about.

I feel that high wage earners are the most exposed to the easy money policies that are reversing, finance being the most obvious. But it permeates into crypto jobs, tech, law, real estate, etc., etc.

I’m looking at this $40K/mo for a $5.xM apt situation, bewildered by the 5x differential between its price-to-rent and what I pay. On this one, no one can fault me for comparing apples-to-oranges w.r.t. high-end vs. low-end. It kinda feels like an issue of financial discipline, for lack of a better word?

I’m the type of person where, if you give me an additional $10 in post-tax income, I might spend an additional $1 of it. I’m probably the exception. We just went through a year where a lot of people got an additional $10, and they bumped their spending by (say) $6 of it. The income will reverse (e.g., investment banking revenues down 40% YoY), more deeply than the broader economy, so you figure this reverses the rent pressure (with a time lag).

True Nada, we over spent last year, at least 2/3 went to gut renovating our modest home. Now it's perfect, we're done. Vacays were another story...

This year, we're trimming the sails big time, feels good and right. I would rather be like you than the other guy : ) relatively speaking of course....

I find the following interesting. Spending the $10 on a renovation feels different to me than spending the $10 on rent/vacay, from a personal finance perspective. The $10 on a renovation is in some ways committing to spend $1 for the next 10 years. I.e., you don’t consume the entire $10 in the first year, the cost of your standard of living hasn’t increased by $10/yr but more like $1/yr. With rent/vacay, the entire $10 gets spent on year 1, and the cost of your standard of living has increased by $10.

From many measures of the economy, the distinction doesn’t matter. All the forms of spending are happening now: boosting GDP now, creating demand / inflation pressure now, etc. But from a personal finance perspective, the renovation seems more prudent. You’ve bumped your standard of living incrementally, paid for upfront, with no future income/spending necessary to maintain it. With vacay, future income/spending is necessary to maintain it, but it’s pretty discretionary spending and easy to change (sit at home & do nothing) and less noticeable to yourself (most of the time, you’re not on vacation). With rent, it’s not so easy to change: moving is a PITA, and there’s no hiding from it on a daily basis.

The sorry situation in Brooklyn Heights reminded me of this UWS townhouse:

https://streeteasy.com/rental/3105605

Only 18 months ago, a savvy person could have been bidding $40K/mo, off a $50K/mo ask for a ~$25M place. Now, we’ve got sloppy bidding of $40K/mo, up from a $30K/mo ask, for a $5M place.

The townhouse has been back on the market for 4 months now, first asking $100K and what then $85K, with no takers yet:

https://streeteasy.com/rental/3793284

One thing that has me scratching my head is trying to understand who in their right mind wants to move into / furnish 15K sq ft and then move it all out 18 months later!

Keith thank you for that palm beach area guide
Ive been teasing a move to Florida for several years.
Have friends and family between Miami and West Palm.

Ive been zillow map window shopping a long time, up and down both Florida coasts.
This of course leads to looking at single family houses on ALL coasts in every state.
It is astounding to me how many $3mm+ houses (post 2022 inflation now $4mm+) there are in this country.

While Ive always fantasized about a single family house on sandy beach, thats a big commitment. Especially to a state in the crosshairs of climate change flooding.
Ill likely end up in a modest high rise and rent sandy beach houses for months at a time.
I like the idea of handing keys off to an owner when the sewage hits the fan.

@'nada: "One thing that has me scratching my head is trying to understand who in their right mind wants to move into / furnish 15K sq ft and then move it all out 18 months later!"

Somebody who needs a place to wait out their now renovation of a similar place, which has gone over target deadline? At that level of income/expense, it's not like they're personally slaving over packing up every book and tennis shoe themselves. Or, they might rent the place furnished as is. "We'd love to have you over, but we're just roughing it on the west side this year while the new place gets finished.", will be the cocktail hour chat. They will then go on to complain about the contractor taking so long (and hinting about how wildly expensive it all is), without disclosing that they have made over 200 major changes after the designer and architect got their signoff on everything down to the color of the outlet plates in the maids room.

I have friends (at a lower price point), who took a 1 yr rental while they were between closings/renovations/occupancies. For a brief while they were carrying 3 places, but convenience and ease were their priorities, not cost.

By the way, love the separate servants staircase on the 68th st place. Rather a rarity these days, alas. (I might have turned it into a servants elevator myself, because when I ring, I want them there sooner than later.)

>> Somebody who needs a place to wait out their now renovation of a similar place, which has gone over target deadline?

That would be a situation that makes sense. A dependent factor there is that you already have 15K sq ft worth of old furniture sitting around? If you don’t, I wouldn’t want to buy new furniture targeting the renovated place because it’ll all get dinged up from the move.

Searching for such a situation on SE at that scale, I ran across this listing in wreck form:

https://streeteasy.com/building/the-kleeberg-residence/sale/1577530

Owners bought it for $15.8M in 2017, gutted it and added 3 subterranean floors. Their stopped short on their plans take it to a full-modern look. Full-modern is my favorite look, but I think it was a mistake / out of character to do this in a townhouse, all the while losing the great existing detail.

Vision of where they were going:

https://streeteasy.com/sale/1392569

What it used to be:

https://streeteasy.com/sale/1213741

Thoughts?

I would have saved some elements of the old interior.

I'm a big fan of the better older architecture, and would have kept a lot of the old decor. There are things I like about the proposed reno (those bathrooms, ex the egg tub), but it all looks a bit too forced for my tastes (like some of Buatta's traditional interiors). I do give the architect credit for working all that stuff l into an unusual shape.

One of my personal traditional townhouse favorites at the moment is 106 E 71st: https://streeteasy.com/sale/1598724?card=1 (decidedly not a wreck).

Spiral staircase: YES.
Top floor situation: yes.
Entire third floor: no.
Formal dining room: NO. Where’s the food coming from, up from the kitchen, through the spiral staircase, with no pantry to stage it? So uncivilized…

Better than most, but I’d take 15 W 68th over it.

“Jeeves, the Astors are coming next week. Please set out the silver chafing dishes on the buffet.”

Ha. I always found most townhouse kitchen and dining room configurations not so conducive to today's lifestyle.

Separately, while these townhouses are way beyond what I can afford or need, W68th is built full leaving not much of a yard or light at the back. Essentially they built another 4000 sq ft on roughly the same size lot.

Nada, Re Kleeberg mansion. What a shame to lose all the historical details? I understand people wanting modern baths, kitchen/s and pair down some on busy details but to make it like a 57th Street new construction?

"Full-modern is my favorite look, but I think it was a mistake / out of character to do this in a townhouse, all the while losing the great existing detail."

Bullet proof windows on the lower floor. Wonder who the current owner is?
https://nypost.com/2021/04/27/nyc-mansion-with-wild-renovation-plans-relists-for-25m/

>> I always found most townhouse kitchen and dining room configurations not so conducive to today's lifestyle.

Certainly. At least with W 68th, you can imagine using the dumbwaiter or back stairs to shuttle things up, stage then in the butler’s pantry, maybe have a food warmer there.

But with the E 71st one, sure it’d be under-used today with an awkward tray-on-wheels transportation once in a while. But what about the days of yore, what were they doing then? There’s clearly a butler’s pantry across the stairs, but where did the dumbwaiter go?

There may have been a dumbwaiter between the kitchen level and the dining room level where the powder room (across from the circular stairs) is now. Or the stair hall area may have been a bit narrower with an enclosed servants staircase across from the main stair (serving all 5 floors). W 68th is a better layout for the servants, no doubt, what with that back stair (You could lose those 2 tiny bathrooms back there and put in a dumbwaiter as well - but then where would the servants go - not all the way back to their rooms on the 3rd floor, certainly?)

That’s probably where it was, Aaron2.

I’m also finding the 3rd floor ceiling height being lower than the 5th floor counter-intuitive. You figure the servants quarters were on the 5th floor, no?

You gotta wonder how many investment bankers were bidding up rents over the past year as they returned to Manhattan…

https://www.wsj.com/articles/investment-banks-prepare-for-lean-times-as-deal-spree-sputters-11656823287

@nada -- I can't remember the house just at the moment (UES, 90s, quite large, built for somebody quite rich), that had the servants rooms on a middle floor with a lower ceiling height. I think it happened, but rarely. It could have been the side effect of renovating something else (a carriage house, perhaps) into a townhouse, and not wanting to completely re-engineer the interior floors.

It does make sense though: If you're the rich owner, do you really want to hear the servants clumping about above you late at night or early in the morning while you're trying to sleep? If their bedroom is below you, and above the LR, this is a solution, at the cost of your having to walk up an extra flight of stairs. But yes, mostly the servants were either on the top floor or the ground floor (and in apartment buildings, the penthouses, which were originally servant's rooms).

My understanding is that it was because of temperature. The hearth was at the bottom in the kitchen, and the fireplaces on the lower floors, so as not to waste the rising heat. So in the winter, the top was the coldest. In the summer, heat still rises making the top the warmest. But I guess different folks thought differently on the matter.

"Rental Listings Are Up
According to our latest market report, rental inventory is rising. This is especially true for Manhattan, where downtown inventory increased by 20% in just one month. Inventory in Brooklyn and Queens, however, is returning more slowly"

https://streeteasy.com/blog/where-nyc-rental-inventory-is-increasing-may-2022-market-reports/?utm_source=Iterable&utm_medium=email&utm_campaign=Agent_Marketing_Market%20Reports_0622

We don't get involved with many rentals these days, occasionally we will for a client that we've worked with previously.

We currently have a very nice listing at The Edge in Brooklyn, that is one hot market! I believe we have 15+ appointments scheduled this Sunday, and we continue to get two to three inquiries a day. Wish some of my sales listings were this hot!

Keith Burkhardt
TBG

I think you are experiencing, first-hand, the reason why the Fed will have trouble bringing down inflation (30% shelter) in the short-run by raising rates.

Nada, What should Fed do in your opinion? How high will be the peak of Fed fund rates? Not sure they can do much beyond making housing ownership more expensive which may put further upward pressure on rents short of a recession.

Why doesn't the FED just throttle back sooner??? Before things get so overheated? All these extremes for a long term 10% return.

While we wait to hear Nada’s opinion, only thing Fed can really control is employment via rates. And employment is a lagging indicator by 3-6 months. Currently, they are far below 2.25-2.5 percent which many would consider long term neutral. So, it is a no brainer that they want to get to 2.5 asap. And given current high inflation to a higher rate.

>> Nada, What should Fed do in your opinion? How high will be the peak of Fed fund rates? Not sure they can do much beyond making housing ownership more expensive which may put further upward pressure on rents short of a recession.

I don't think they have any choice at this point other than to raise rates. How high will they go? I dunno, but the idea of settling back to ZIRP afterwards seems increasingly quaint.

It's not just rates which they control, it's also their balance sheet. Check out various pieces on WallStreetOnParade especially re:reverse repo market.

30, Balance sheet is just a tool to directly control longer term rates and announced roll-off in balance sheet by the Fed will keep upward pressure on the rate. So at the end of the day, it is about controlling rates.

Reverse repo and repo facilities are secured funding, market functioning, liquidity and fed fund target management tool which is needed as Fed capital requirement for dealer balance sheet were made onerous.

https://www.newyorkfed.org/markets/desk-operations/reverse-repo