The Best of Times, The Worst of Times in Real Estate:

I’m sitting at one of the many cafés that line the Seine, directly across from the Conciergerie— the former prison where Marie Antoinette spent her final days before succumbing to the sharp blade of the guillotine. It’s one of the many inescapable reminders of the French Revolution scattered throughout Paris.

As I sit here, watching the tourist-laden bateaux ply the river, it’s hard not to think of Dickens’ famous words: “It was the best of times, it was the worst of times.” It’s a line written more than two centuries ago, in a war-torn country, to describe the chasm that existed between the haves and the have-nots of revolutionary France. The sentiment still resonates today and captures the current mood of the real estate market in Rochester.

In the past twelve months, there were 86 homes sold in the region in excess of $1,000,000. That was a 30% increase from the preceding year. For these luxury buyers and sellers, it

definitely is the best of times. Meanwhile, for first-time buyers, it’s been the worst. Inventory is scarce. Mortgage rates are high. Affordability is at all-time lows. As a result, the average age of a first-time buyer rose from 28 in 1991 to 38 today. In other words, the French national motto “Liberté, Égalité, Fraternité” has been replaced by the modern-day lament “Scarcity, Inequality, and Anxiety”.

Economic Shifts and the Path Ahead

The journalist, Derek Thompson, provides one lens to help us understand, in part, how this national disparity came to be. Fifty years ago, municipal building codes were strengthened

throughout the country. Among other stringencies, the size of building lots grew. So did the requisite number of garage bays. Suddenly, the cost associated with building a house increased dramatically. Thirty years later, the Great Recession bankrupted many homebuilders. Those enfeebled companies that remained standing built fewer homes in the 2010’s than during any decade on record. Finally, in the past five years, we’ve seen a market frozen in place due to high interest rates, rate-lock, a paucity of inventory, rising prices, and low affordability.

Thompson’s assessment tracks perfectly with what has occurred here in Monroe County and it accurately describes the seeds of our current housing crisis. In 1975, Rochester City Zoning Overhaul was enacted and, four years later, Monroe County began encouraging municipalities to revise zoning ordinances and subdivision regulations. In the aftermath of the Global Financial Crisis, several local builders declared bankruptcy and went out of business further constraining one’s ability to build a new home. And finally, underscoring Thompson’s point about inventory collapse, the real estate app Reventure reports that, in July of 2016, there were 2,504 single family homes available for sale. In July of this year? Just 611. A staggering drop of 76%.

Is Relief on the Horizon?

Paradoxically, that which has been a boon for the national economy has continually depressed the housing market. It’s a tale of two economies. One- the broader U.S. economy- is enjoying the best of times: growing equity in the value of their residence, strong job growth, and an exploding stock market. The housing market, however, has endured what can only be described as the worst of times. Ironically, it’s going to take some bad economic news to provide relief for the national residential real estate industry.

That news may have arrived this past week. On Friday, the Bureau of Labor Statistics dropped a large incendiary device when it announced that only 73,000 new jobs were created in the month of July. The concussive shockwave, however, was the fact that job formation was revised downward by a massive 258,000 for the months of April and May!! On average, there were 168,000 jobs created every month last year. So far this year, the number has dropped to a paltry 85,300.

Meanwhile, inflation, which had been dormant, is rising once again from 2.2% in April to 2.6% in June. As a result of recently concluded tariff impositions, it can be assumed that prices will continue to increase in the short term. This uptick will be exacerbated as warehouse inventories, overloaded with foreign goods, purchased and stored in anticipation of rising tariffs, are diminished.

In the aggregate, the data could plausibly be boxing the Federal Reserve into an impossible position: fight inflation or support employment. The Chicago Mercantile Exchange quickly provided their answer. In response to the jobs report, the CME is predicting an 80% probability of a quarter-point rate cut at the Fed’s September 17th meeting. In other words, it looks as if the Fed will choose to support employment. This is great news for the housing industry. The irony? The economic pain required to unlock housing may be just beginning and, perhaps, this is the first of several rate cuts in the coming months. According to Mortgage News Daily, rates have already dropped to 6.63% and it’s hard to imagine a scenario in which they won’t soon fall further.

While I feel that change is afoot, I don’t believe this is the dawning of a new era- one in which the housing market begins to experience the best of times at the expense of the general economy’s worst. If we’re fortunate, we’ll enjoy a bit of equilibrium- one in which both get to enjoy a bit of shared prosperity and overdue calm.

Navigating Today’s Market Together

At Elysian, we’re not sitting on the sidelines waiting for interest rates to fall. We’re actively working with buyers, especially first-timers—to navigate this market in real time. We’re advising clients on how to strengthen their offers without overpaying, and we’re tracking off- market opportunities that never hit the MLS. This market is hard, yes. But it’s not impossible.

You just need the right team—and a game plan that’s built for the market we have, not the one we wish we had.

If you have questions or concerns about real estate, please give me a call at 330-8750 or email me at mark@marksiwiec.com. Enjoy the remainder of summer!