Posted by Jonathan J. Miller -Monday, January 23, 2006, 12:10 AM
New York City Mayor Michael Bloomberg on Friday said the real estate market was slowing “dramatically” and only a “miracle” could stop soaring mortgage rates from eating into housing prices [Reuters].
The real estate market is slowing down dramatically and we’re going to have a problem down the road,” Bloomberg said.
“If people who want to sell their houses have to wait a longer time before someone comes along and buys it, it would be a miracle if prices didn’t start to go down,” he said.
The Reuters story referred to the report [pdf] I prepare for Prudential Douglas Elliman so perhaps he was referring to the sharp drop in the number of sales we saw in the fourth quarter. He said that if people have to wait longer to sell their properties, then price levels will weaken.
From a macro perspective, it seems like he is going out on a limb in his characterization [Inman], especially given his business experiences with the sensitivity of the financial markets. A statement like this could cause many in the real estate market pause and wonder what else does he see? He refers to “soaring” mortgage rates but the Fed is signaling it is near the end of its “measured increase” strategy on short term rates and long term rates have been falling since November.
From a political perspective, the city is running a large surplus ($3B) coming in part from the taxes paid by the housing sector and one could speculate he is positioning himself in the next fiscal year to lower the expectations of those who would like to spend it.
Now that the MTA transit union fell 7 votes short of ratification [NY Post] of the agreement hammered out by the union leaders and the city, it will be more difficult to take a hard fiscal stance with that kind of surplus.
Other local and state governments seem to be wary of housing’s impact as well: Housing Slowdown: Impact on State Government [Calculated Risk]