Bess Freedman, CEO of Brown Harris Stevens, discusses the factors impacting the housing market and spotlights the latest trends within New York's luxury real estate.  

Opening Bell

Mortgage Applications Increase as Rates Drop for First Time in 3 Months

here to discuss is best Friedman Ceo of Brown Harris stevens best glad to have you on this morning. Um what's your reaction to this week's mortgage application data. And I'm curious how do you think Russia's invasion of Ukraine is impacting the housing market? This hasn't been kind of an intuitive connection because we do focus on oil prices and how the impacts that, but we are seeing an impact here in the housing market. Hi Alicia, Good morning. Nice to see you. Can you hear me okay? Because I you're a little bit choppy. Okay, good. As long as you can hear me. Um so listen, I think that as you know, real estate is all about supply and demand and we've had historic records last year and this year, um the challenge for us in housing is really one of supply and so we're seeing prices tick up as inflation goes up shrinking supply and that's an issue. And I think that what's going on right now with the war that Russia has waged against Ukraine offers other challenges globally. Um We see nervous energy in our markets. You see the volatility with the stock market which is, you know, concerning for people and I think what you're going to see in housing is less discretionary spending, for example, Alicia last week we had a buyer who was Uh signed up to buy something for over $20 million palm beach um and decided not to follow through with it. And it was squarely because of what's going on um with Ukraine and it wasn't because he couldn't buy it was because he felt he wanted to wait and see and I think we're gonna have a lot of weight and see in the housing market when it comes to discretionary spending. Wow, that's actually an interesting kind of anecdotal story there. And interesting in the greater picture of what you mentioned in the supply side of things, we have seen, you know, inventory levels just maintain um these lower levels over the better part of the last two years with inflation and then the expected rate hikes. Um you know that that's coming up, I'm getting, I'm curious to get your, your gauge on, you know, demand for, you know, places like large cities and the suburbs throughout the country. Do you think that the demand picture is persistent enough to pass by kind of these higher prices, both on the inflation side and on the interest side. You know, I think you have the must buyers, you know, the life cycle, people who are getting married or having families or um you know, expanding etcetera when people lose loved ones and they have to and they decide to sell so those things are going to continue in the housing market because they just do that's the must buyer. Um I think what you're going to see a little bit of a slowdown with is that just because I want to buy because I can, because I have a lot of money buyer, although the luxury market has done so well better than I could have even imagined in 2021. And it continues to do so, particularly for example, in new york city, in the Hamptons Connecticut on Palm beach, those people, people are spending a lot of money, but I do think Alicia that in depending on what happens with the war, that people are gonna wait a little bit on the sidelines, um, you know, people are concerned, they're worried, you know, from a financial perspective, it's concerning, but also on a human level, uh, were, you know, hearing stories about what families are going through and it's very hard to be on the sidelines and witness all of this. So, I think that in Zelensky, President Zelensky has shown a level of courage that you don't see in politics quite often he's being compared to Winston Churchill because he's really got a straight vision to do the right thing and protect the people and it takes your breath away. So, I think, um, we have to kind of wait and see what's going to happen with the markets and where we end up if this gets resolved, that would be fantastic. Um, but we don't know yet, and I think um it's it's gonna take some time, such fascinating context there in terms of, you know, again, the picture and the and the situation in Ukraine, we think of it impacting so many other sectors, not necessarily the housing sector where you're really illustrating, especially on the higher tier housing into the luxury buyer, the impact being more broadly significant. They're curious over 547,000 people moved from New Northeast states to a state like florida, for example, in 2021 when you factor in, you obviously have mentioned a moment ago that new york city has still done relatively well, especially the luxury market here in new york city when you factor in that move and things like, you know, continued potential waves of covid 19 or just employers right now adopting this remote work model and this hybrid model just being more dominant than, you know, two years ago, certainly. And who knows how domine it can become. Do you see those as obstacles for a luxury real estate, you know, even in a city like new york city. Yeah, I mean, we have continued obstacles. I mean, that's just a reality and people did leave new york city. Um a lot of that was had to do with taxes, some of the irresponsible tax legislation that drove people out of new york city. And we're hoping now Alicia with a new mayor, Mayor Adams and and Governor Governor Hakka, who are working together that we will have more responsible legislation and keep people in new york city Very important and we know that um the mayor is working really hard to mitigate crime because we want tourism and we want people to raise families there. Um, but we're seeing continued commitment to New York City um there was something like 41 contracts signed over $5 million New York City, which shows that people want to be a part of the city. Um and we have a new city council uh and a new speaker, Adrienne Adams. And so I think everybody wants to work together, we're all sort of fatigued of this sort of very left and very right, and we're looking for a more moderate new york city to keep people here. Um And as we're sort of hopefully Covid is now in the rear view mirror, I hope and people are coming back to work um and they want to show up and support local restaurants. Um It's still, I think one of the greatest cities in the world and I'm proud to live there and raise a family there as a native new yorker. I share that sentiment, you know, with you as well. Um What about new Yorkers buying into new developments? Is there a concern over inventory levels, Especially over over the next five years? You said for new developments, new developments, new Yorkers buying into new development? Is there concern kind of over inventory levels over the next five years? You know, I don't think we we see much of a concern. We do see a commitment um from developers um to build. I mean my the owners of my firm have um just got a great new space downtown that they're gonna build, they have a new project on the Upper east Side um that we're going to launch in april um and you're seeing, you know, other projects all over the Upper East side and downtown um that are selling and so I think that you're going to see a continued commitment for that inventory levels, they could be challenged, but again, it all comes down to supply and demand when there's a healthy intersection between the two, we see our markets moving well. Right now, the challenge is one of supply in other regions, new york city still has a decent amount of supply because remember we were in a buyer's market before um we are now definitely in a seller's market and so we're gonna have to wait a little bit of time and see, but we still have healthy inventory in new york city. I'm curious, what are the trends are you noticing within the new york kind of real estate market right now, trends are people really want outdoor space? I would say that's the number one trend that I'm seeing. I think the pandemic made people feel like they wanted some fresh air and the other one is definitely a home office because a lot of people are working from home, they know they can do that and so they want a little special space where they're not too close to the kitchen, so they're not snacking too much. Um, but I think that people at home office and outdoor space are the top two that we're seeing as someone who spent the first year of the pandemic in a smaller one bedroom apartment turning my living room into my office, I completely understand and upgraded to a slightly bigger apartment with some outdoor space so completely resonates with me there before I have to let you go here, what is your outlook on the overall housing market going into the second half of this year? Any chance we see inventory levels pick up, get to that point where there is a better match of what demand, You know, it's hard to say. I think, you know, we see inflation, we're gonna see gas prices go up, which is gonna be a challenge. Um I think demand is still high, um, but supply is challenge and I don't see a change. You know, the supply chain, lumber, everything is expensive, inflation is taking its toll. So I think we're gonna have a little bit of a slowdown. We had A great 2021 um and it's true that the trees can't just grow to the sky. They have to stop at some point. So I think, you know, it's gonna, it may slow down a little bit. Um, so we'll have to see what happens and the slowdown will be good on the buyer side, right buyers have been waiting for for a little bit of a relief and a little bit of an opportunity to get in there. Thank you so much. Really appreciate your insight. Best Friedman Ceo of Brown Harris stevens.