Barry Sternlicht warns of ‘major crash’ in NYC housing market
The pace of rent increases is declining, he said, while new housing sales are their lowest since 1952. Demand for mortgages has fallen by 29% over the past year. Home-loan rates have nearly doubled to 6%, highest since 2008, according to data Thursday from Freddie Mac.
“The market is doing what it’s supposed to do,” Sternlicht said, as the Federal Reserve rapidly raises interest rates.
Rents for New York apartments remain at stratospheric levels, with average rent for a Manhattan dwelling reaching $5,113 in July, a 28% increase over the prior year, according to research firm Miller Samuel. But even in Manhattan there are signs of fatigue, with rents in July falling 1.1% on a per-square-foot basis compared to the prior month.
Share prices of residential brokers have all but collapsed. Compass, which went public last year at $18 a share, trades for a bit more than $3. Douglas Elliman has lost more than half its value since it was spun off late last year from Howard Lorber’s Vector Group.
Meanwhile, the stronger players are fortifying their fortresses. On Wednesday, real estate analytics firm CoStar Group announced it would raise $750 million by issuing shares before joining the S&P 500 next week. CoStar plans to use the proceeds for acquisitions, and there’s no doubt the merchandise has gotten cheaper.
Sternlicht said the Fed is making a mistake by raising interest rates when the economy is already slowing. He said inflation is likely to slow significantly as retailers aggressively discount goods to whittle down bloated inventories.