Expectations were that New York City would become less sleepy after the financial crisis of 2008. As the former New York Stock Exchange (NYSE) headquarters are demolished to make way for a new World Trade Center, job cuts continued to depress the real estate market. New York City is undergoing its biggest housing and office building boom in years thanks to the $15 billion project.
How confident can NYC really be that it will reach the inflection point? Unfortunately, momentum to date has been marred by a number of factors.
First, investors have remained nervous about the sustainability of the economic recovery. Today, European fiscal, political and economic crisis still dictate market sentiment. As if the U.S. is not already great enough, there is concern about the China’s economy, too. Europe continues to struggle with overcapacity, a weak banking system and upcoming referendums on Brexit and French presidential elections, among other things.
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While the U.S. Federal Reserve may dial back monetary stimulus in the next six months, to stimulate the economy, the increasingly sticky oil price is making low interest rates difficult to argue for. When markets are not sure of the ability of the Fed to be engaged, and the economy is not improving, it is natural for investors to weigh time horizons carefully. It is easy to be distracted by just the last five minutes of a new deal made or an unresolved problem causing a disruption or raise.
Housing market policy makers should be working to increase supply and decrease demand, in order to put downward pressure on prices. If you cannot know what it takes to generate jobs and put downward pressure on prices, then it is almost impossible to have a practical conversation with Congress about both consumer and capital policies that further improve housing market affordability. Yet this is a conversation that must happen.
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The housing market is a notoriously fickle one. Recent developments are growing pains in a more sustained recovery. Expectations should be more fluid and modest. One thing is certain, NYC still needs all hands on deck to recover. Investors, corporations and labor are not the right people to lead the nation to prosperity.
Ronen Banur is CEO of Curacao Direct, a privately owned direct marketing company.