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    Housing Market Gridlock: Buyers Are Eager, but Sellers Are Scarce

    Homeowners with low-rate mortgages are delaying the decision to sell until market conditions change.The housing market typically comes to life in spring, when buyers emerge in the warmer weather. This year, the market appears stuck in a deep freeze, and the biggest culprit is a lack of sellers, housing experts say.There is interest among buyers — mortgage applications were up 10 percent in March from the month before — but the number of homes for sale is low. The mismatch is caused in part by homeowners who are inclined to sell but are sitting on the sidelines, scared off by the steep prices and mortgage rates that they would face as buyers.More than three-quarters of sellers in a recent survey by Realtor.com said they felt “locked in” to their home by their own low mortgage rate, according to a recent survey by Realtor.com. More than half said they planned to wait until rates fell before putting their homes on the market.Sandy Robinson, a 71-year-old retired teacher in Fairhaven, Mass., is daunted by the market. She would like to sell her two-bedroom townhouse but is worried about being able to afford a new home. “It’s a little scary now, and you have to be careful,” she said.A stalemate has mired the housing market, when it should be more robust. Sales of existing homes in March were down 22 percent from the year before, according to the National Association of Realtors. The inventory of unsold homes on the market at the end of March totaled 2.6 months’ supply, meaning it would take that long to sell them. Inventory is typically twice that amount to balance supply and demand.“We are in a real gridlock situation,” said Robert Frick, corporate economist at the Navy Federal Credit Union. “It’s going to be a tortuous process to unfreeze the market and take a long time to get back to a normal supply-and-demand situation.”Fewer homes for sale mean more competition among buyers, which leads to bidding wars and drives up prices. Although down from recent highs, the average price of a house remains about 40 percent higher than at the beginning of 2020, according to the S&P CoreLogic Case-Shiller index, which measures prices across the nation.“Everybody is a little surprised at the level of price resilience,” said Todd Teta, chief product and technology officer for Attom Data Solutions, a real estate analytics firm.Ellen Goldman and Sam Savage are looking to downsize from the Florida home they have lived in since 2004 but are in no rush to sell.Scott McIntyre for The New York TimesMatt Berger would like to sell his three-bedroom starter home in Lebanon, Ohio, where he lives with his wife and two young children, but is holding back. “It feels tight now, and will only get tighter as the kids grow,” he said.They are looking to move closer to Cincinnati, but homes they could afford a year ago are now out of their price range. Adding to the pressure is the low mortgage rate on their current home: “We are in the mid-threes” — roughly half the national average — “and I’d hate to have to say goodbye to that,” said Mr. Berger, 42.“It’s a doubly whammy of the higher interest rates and the home values being so high, and that is scaring us off,” he added. He and his wife are hoping that mortgage rates will fall and they find a cheaper home in a year or two, before their children are settled in school.The average rate on the most popular home loan, the 30-year fixed-rate mortgage, is 6.43 percent, Freddie Mac reported on Thursday, more than twice what it was two years ago. Mortgage rates peaked above 7 percent late last year, but the decline since then has been slow and uneven.To get sellers more motivated again, rates will have to fall to the “magic mortgage rate” of 5.5 percent, according to a survey by John Burns Research and Consulting. More than 70 percent of prospective home buyers told the researchers that they were not willing to accept a mortgage above that rate.“Homeowners seem to be pretty patient right now,” said Maegan Sherlock, a senior research analyst at John Burns. “Until things get a little better, those people are going to hold out,” she added.Most industry experts believe the tipping point is still a ways off. “This is going to be a transition year,” said Danielle Hale, the chief economist of Realtor.com. “As we move into 2024, we should see more people with an appetite to buy.”The market also may thaw as demand from frustrated buyers is met by home builders, which “historically created first-time home opportunities and move-up opportunities,” said Mr. Teta of Attom.A lack of inventory of existing homes appears to be pushing buyers to newly built homes, a smaller market where sales have held up better. Sales of new single-family homes jumped nearly 10 percent in March from the month before, according to the Census Bureau.The National Association of Realtors forecasts that sales of new homes will increase 4.5 percent this year and 12 percent in 2024. It expects existing-home sales to drop about 9 percent this year and then bounce back in 2024.And there are always reasons that reluctant homeowners could be compelled to sell, like job relocations, downsizing or divorce, said Iliana Abella, executive director of sales at the Abella Group, a real estate brokerage in Miami.“If you are planning to stay in your home for longer than five years, 6 percent is not going to kill you,” she said of current interest rates.Still, many homeowners are content to wait.Ellen Goldman, a 72-year-old retired lawyer in Naples, Fla., is looking to downsize. She and her husband, Sam Savage, have lived in their two-story home since 2004, but realize that the stairs will get more difficult as they age.“We both work out, and it’s not an issue,” Ms. Goldman said, adding that “we want to make the move now before it becomes too hard.”But they are in no rush. “We don’t have to do this,” she said, as they keep an eye on local prices. “We would be fine staying, too.” More

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    A ‘Rocky and Bumpy’ Economy Where Wages Are Up and Inflation Persists

    Key pay and inflation gauges have stayed stubbornly high as Federal Reserve officials consider when to stop raising interest rates.Inflation isn’t as high as it was last year. The job market isn’t as hot. The economy is slowing down. But none of this is happening as quickly or as smoothly as Federal Reserve officials would like.The latest evidence came on Friday, when a set of government reports painted a picture of an economy that is generally headed in the direction that policymakers want, but is taking its time to get there.“We knew that inflation was going to be rocky and bumpy,” said Megan Greene, chief economist for the Kroll Institute. “We found peak inflation, but it’s not going to be a smooth path down.”Consumer prices were up 4.2 percent in March from a year earlier, according to the Fed’s preferred measure of inflation, the Personal Consumption Expenditures index, the Commerce Department said Friday. That was the slowest pace of inflation in nearly two years, down from a peak of 7 percent last summer.But after stripping out food and fuel prices, a closely watched “core” index held nearly steady last month. That measure rose by 4.6 percent over the year, compared with 4.7 percent in the previous reading — a figure that was revised up slightly.Wages, meanwhile, continue to rise rapidly — good news for workers trying to keep up with the rising cost of living, but a likely source of concern for the Fed.Data from the Labor Department on Friday showed that wages and salaries for private-sector workers were up 5.1 percent in March from a year earlier. That was the same growth rate as in December, and defied forecasters’ expectations of a modest slowdown. A broader measure of compensation growth, which includes the value of benefits as well as pay, actually accelerated slightly in the first quarter.Labor Department on Friday showed that wages and salaries for private-sector workers were up 5.1 percent in March from a year earlier.Hailey Sadler for The New York TimesThe Fed has been raising interest rates for more than a year in an effort to cool off the economy and bring inflation down to the central bank’s target of 2 percent per year. The data on Friday is likely to add to policymakers’ conviction that their work is not done — officials are widely expected to raise rates a quarter percentage point, to just above 5 percent, when they meet next week. That would be the central bank’s 10th consecutive rate increase.Wage data is a particular focus for Fed officials, who believe that the labor market, in which there are far more available jobs than workers to fill them, is pushing up pay at an unsustainable rate, contributing to inflation. Other measures had suggested a more significant slowdown in wage growth than showed up in the data on Friday, which is less timely but generally considered more reliable“If any Fed officials were wavering on a May rate hike,” Omair Sharif, founder of Inflation Insights, wrote in a note to clients on Friday, the wage data “will likely push them to support at least one more hike.”But a crucial question is what comes after that. Central bankers forecast in March that they might stop raising interest rates after their next move. Jerome H. Powell, the Fed chair, could explain after the central bank’s rate announcement next week if that is still the case. The decision will hinge on incoming economic and financial data.Investors largely shrugged off the data on Friday morning, focusing instead on a week of robust profit reports that suggest corporate America has yet to fully feel the pinch of higher interest rates. The S&P 500 index rose 0.5 percent in midday trading. The yields on Treasury bonds, which track the government’s cost to borrow more money and are sensitive to changes in interest-rate expectations, fell slightly.The Fed faces a delicate task as it seeks to raise borrowing costs just enough to discourage hiring and ease pressure on pay, but not so much that companies begin laying off workers en masse.Higher interest rates have already taken a toll on housing, manufacturing and business investment. And data from the Commerce Department on Friday suggested that consumers — the engine of the economic recovery to date — are beginning to buckle. After rising strongly in January, consumer spending barely grew in February and was flat in March. Americans saved their income in March at the highest rate since December 2021, a sign that consumers may be becoming more cautious.“You’re seeing some of that robustness to start the year really start to reverse a little bit,” said Stephen Juneau, an economist at Bank of America.Many forecasters believe the recovery will continue to slow in the months ahead — or may already have done so. The data from March does not capture the full impact of the collapse of Silicon Valley Bank and the financial turmoil that followed.“If you take a picture of the data as it was in the first quarter, you’re left with this impression of still robust economic activity and inflation that’s still too high and too persistent,” said Gregory Daco, chief economist at EY, the consulting firm previously known as Ernst & Young. If there was real-time data on spending, credit standards and business investment, he said, “that would tell a very different picture from what the first-quarter data would indicate.”The challenge or Fed officials is that they cannot wait for more complete data to make their decisions. Some evidence points to a more substantial slowdown, but other signs suggest that consumers continue to spend, and companies continue to raise prices.“If we see inflation that warrants us needing to take additional pricing, we’ll take it,” Brian Niccol, chief executive at the burrito chain Chipotle, said during an earnings call this week. “I think we’ve now demonstrated we do have pricing power.” The company raised its menu prices by 10 percent in the first quarter versus the same period last year.Wage growth is a particularly thorny issue for the Fed. Faster pay gains have helped workers, particularly those at the bottom of the earnings ladder, keep up with rapidly rising prices. And most economists, inside and outside the Fed, say wage growth has not been a dominant cause of the recent bout of high inflation.But Fed officials worry that if companies need to keep raising pay, they will also need to keep raising prices. That could make it hard to rein in inflation, even as the pandemic-era disruptions that caused the initial pop in prices recede.“It always feels good as a worker to see more money in your paycheck,” said Cory Stahle, an economist for the employment site Indeed. “But it also feels bad to walk into the store and pay $5 for a dozen eggs.”Joe Rennison More

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    Key inflation gauge for the Fed rose 0.3% in March as expected

    Despite a year’s worth of interest rate increases, inflation rose again in March, according to economic data released Friday that the Federal Reserve watches closely.
    The personal consumption expenditures price index excluding food and energy increased 0.3% for the month, in line with the Dow Jones estimate. On an annual basis, so-called core PCE increased 4.6%, slightly higher than the expectation for 4.5% and down 0.1 percentage point from February.

    Including the volatile food and energy components, headline PCE also rose just 0.1% for the month, equating to a 4.2% annual increase, down sharply from 5.1% in February. That measure peaked out around 7% in June 2022, the highest level since December 1981.
    The headline number was softer as energy prices slid 3.7% for the month while food costs declined 0.2%. Goods prices fell 0.2% while services increased 0.2%.
    In another key inflation measure for the Fed, the employment cost index increased 1.2% for the first quarter, higher than the 1% estimate.
    The inflationary pressures were reflected in the willingness of consumers to keep spending. Personal income rose 0.3% for the month but consumer spending was flat, as expected.
    While the annual rates are below the peaks hit in 2022, they are still well above the central bank’s 2% target and further evidence that price increases are proving stickier than policymakers had anticipated.
    Since March 2022, the Fed has raised its benchmark interest rate nine times for a total of 4.75 percentage points. Markets widely expect the rate-setting Federal Open Market Committee to approve another quarter percentage point increase at next week’s meeting, before it pivots to see the impact the policy tightening is having on the $26.5 trillion U.S. economy. More

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    Inflation Cooled in March, but Stubborn Price Increases Remain

    The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures index, slowed in March. But signs point to staying power.Inflation is slowing, a fresh reading of the Federal Reserve’s preferred index showed, but costs continue to climb rapidly after stripping out volatile food and fuel — which shows that price pressures retain staying power and it could be a long road back to normal.The Personal Consumption Expenditures index climbed by 4.2 percent in the year through March, down notably from 5.1 percent in the year through February.But after stripping out food and fuel prices, a closely watched “core” index held nearly steady last month. That measure rose by 4.6 percent over the year, compared with 4.7 percent in the previous reading — a figure that was revised up slightly.The data provide further evidence that inflation is moderating, but that the process remains bumpy and could take a long time to fully play out. Fed officials have raised interest rates sharply over the past year to make money more expensive to borrow and slow demand, and those moves are only slowly trickling through the economy and weighing down price increases.The central bank meets on May 3 to make its next policy decision, and officials are widely expected to raise rates by a quarter percentage point to just above 5 percent. Markets will be just as focused on what they signal for the future: Central bankers forecast in March that they might stop lifting interest rates after their next adjustment. Both incoming price and wage data and financial news could inform whether they feel comfortable hitting pause.The Fed will also need to weigh turmoil in the banking sector as it considers its next move. A series of prominent bank failures in March sent tremors through the system, and those persist. First Republic has continued to struggle, and its stock plummeted this week. Problems in the industry can slow lending to consumers and businesses, weighing on the economy.With growth slowing and the bank issues further weighing consumers down, companies may find in the coming months that they are less able to charge more for their goods and services without scaring away customers. So far, though, many have retained an ability to raise prices.“If we see inflation that warrants us needing to take additional pricing, we’ll take it,” Brian Niccol, chief executive at the burrito chain Chipotle, said during an earnings call this week. “I think we’ve now demonstrated we do have pricing power.” More

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    Euro zone economy ekes out 0.1% growth in first quarter, misses expectations as Germany stagnates

    Euro zone gross domestic product grew by 0.1% in the first quarter, missing a forecast of 0.2% growth.
    Annual growth was also below expectations of 1.4%, at 1.3%.
    While the bloc has avoided a widely feared recession, growth will continue to be impacted by monetary tightening, with the European Central Bank expected to hike rates by at least 25 basis points next week.

    Skyscrapers of the city center can be seen from the Lohrberg in the north of Frankfurt. Photo: Arne Dedert/dpa (Photo by Arne Dedert/picture alliance via Getty Images)
    Picture Alliance | Picture Alliance | Getty Images

    The euro zone economy grew by a marginal 0.1% in the first quarter of the year, preliminary figures showed Friday, even as Germany’s GDP flatlined over the period.
    The print came in below analyst expectations, with a Reuters poll of economists previously forecasting quarterly growth of 0.2%. The economy expanded by 1.3% on an annual basis, just missing an outlook of 1.4%.

    Earlier this month, statistics agency Eurostat had revised down its fourth-quarter 2022 GDP estimate for the euro zone from 0.1% quarterly growth to no growth, following 0.4% growth in the third quarter.
    The slight first-quarter growth signal comes as economic performance contends with persistently high inflation. Energy prices have been a key driver over the past year, as European consumers progressively lost access to Russian supplies in the wake of Moscow’s full-scale invasion of Ukraine. Carsten Brzeski, global head of macro at Dutch bank ING, said that the fall in wholesale energy prices, warmer-than-expected weather and fiscal stimulus had helped the bloc dodge a widely-feared recession over the winter.

    But he noted significant disparities between individual countries, and said that future growth would be impacted by an ongoing race between positive momentum in industry and wage growth on the one hand, and European Central Bank monetary tightening and U.S. recession risks on the other.

    Divergence

    Europe’s leading economies diverged in their first-quarter performance, national figures showed on Friday. The German economy stagnated over January-March, compared with the previous three-month period. It was up 0.2% on an annual adjusted basis and 0.1% lower on a non-adjusted basis due to one extra working day in the prior year, German statistics agency Destatis said.
    Deutsche Bank economists said Germany had avoided a technical recession by a “hair’s breadth” and reiterated their call of 0% GDP growth this year, with the economy held back by high inflation, rate hikes and an expected second-half U.S. recession.

    France’s GDP meanwhile picked up by 0.2% in the first quarter, Insee statistics revealed, despite a spate of widespread strikes that slowed activity sparked in protest of President Emmanuel Macron’s planned pension reforms.
    The Irish GDP was a notable weak spot, declining by 2.7% on the previous quarter, while Portugal’s economy grew by 1.6%.

    Policy stake

    The GDP figures will be keenly watched ahead of the May 4 meeting of the ECB, which seeks to tackle headline inflation of 6.9% and core inflation at a record high of 5.7%.
    Some ECB policymakers have stressed they believe they have further to go on interest rate rises as they weigh up a 25 basis point or even 50 basis point hike next week. The March collapse of several lenders across the U.S. and Europe and ensuing turmoil in the banking sector had ignited questions whether central banks would be forced to slow or walk back their interest rate increases.

    The ECB most recently raised its three key interest rates by 50 basis points in March, taking the main rate to 3%.
    Nerves on the European front have largely settled and officials have underlined the strength of the sector, though the shadow of deposit flights and further volatility remains. More

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    What to Watch as the Fed Releases Its Look Into Silicon Valley Bank

    The Federal Reserve is set to release an examination of why its oversight of the bank failed to stem disaster at 11 a.m. on Friday.WASHINGTON — The Federal Reserve is set to release a highly anticipated report on Friday examining what went wrong with its oversight of Silicon Valley Bank, which collapsed in mid-March, in the largest bank failure since the 2008 financial crisis.The post-mortem comes as the aftershocks of Silicon Valley Bank’s collapse continue to shake the American financial system: First Republic, which required a cash infusion from other large banks as nervous customers pulled their deposits and fled, remains imperiled.The Fed’s investigation into what went wrong at Silicon Valley Bank has been overseen by Michael S. Barr, the central bank’s head of supervision and one of the architects of the 2010 Dodd-Frank law, which aimed to prevent a repeat of the 2008 crisis. The review was announced on March 13, just after S.V.B.’s failure and the government’s sweeping announcement on March 12 that it would protect the bank’s large depositors, among other measures to shore up the banking system.That same weekend, the federal government also shuttered a second institution, Signature Bank. The Federal Deposit Insurance Corporation, which was the primary supervisor for Signature, will release its own report Friday.Still, most of the attention has focused on S.V.B., in part because significant weaknesses at the bank appear to have started and grown progressively worse in plain sight in the years leading up to its demise. The bank had a large share of deposits above the government’s $250,000 insurance limit. That is a potential risk, given that uninsured depositors are more likely to pull their money at the first sign of trouble to prevent losing their savings.The bank’s leaders also made a big bet on interest rates staying low. That became a problem as the Fed, trying to control rapid inflation, carried out its most aggressive rate increase campaign since the 1980s. The bank held longer-term bonds that dropped in value as interest rates rose, because newer debt issued at the higher rates became more attractive for investors.Supervisors at the Fed were aware of many of the bank’s problems and had flagged and tried to follow up on some of them. Yet the issues were not resolved quickly enough to save the bank.The questions that the review could answer center on what went wrong. Was it a problem at the Federal Reserve Bank of San Francisco, which supervised the bank, or did the fault rest with the Federal Reserve Board, which has ultimate responsibility for bank oversight? It is also unclear whether there was an issue with the Fed’s culture around — and approach to — supervision, or whether the existing rules were lacking.“It’s a little bit of a mystery” what the report will hold, said Steven Kelly, a researcher at the Yale Program on Financial Stability, explaining that he had little expectation that the release would point fingers. “In some sense, they really need a head on a pike — and they’re not going to do that in this report.”Jeff Hauser, director of the Revolving Door Project, said he was interested to see how the report would deal with the tone around bank supervision at the Fed, and the reality that Gregory Becker, S.V.B.’s chief executive, sat on the board of the Federal Reserve Bank of San Francisco. That role gave Mr. Becker no official influence over bank oversight, but Mr. Hauser thinks that such positions might offer banks the advantage of more prestige.Mr. Hauser said he also thinks an independent review is needed in addition to the Fed’s internal probe and whatever its inspector general — who is also looking into the matter — eventually releases. Mr. Barr will still have to work with his colleagues in the future, Mr. Hauser pointed out, and the central bank’s inspector general is appointed by the Fed chair.“We need someone with some independence to dig in,” Mr. Hauser said. More

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    IMF warns of ‘disorderly’ house price corrections in Europe as interest rates move higher

    “House price declines could accelerate if markets reprice inflation risks and financial conditions tighten more than expected,” the IMF said.
    Data from Europe’s statistics office, Eurostat, showed house prices dropping for the first time since 2015.
    The European Central Bank is due to meet next week, and one of its members has recently suggested that a 50 basis point hike is not off the table.

    A pedestrian inspects advertisements for residential properties for sale in Stockholm, Sweden.
    Bloomberg | Bloomberg | Getty Images

    STOCKHOLM, Sweden — The International Monetary Fund warned Friday of “disorderly” house price corrections in Europe, at a time when the region is struggling to bring down inflation.
    In its latest regional economic outlook for Europe, the IMF said that a downward correction is already underway in some European housing markets, but this decline could accelerate as central banks increase interest rates further.

    “Disorderly corrections in real estate markets could occur even if broader financial distress is avoided. A housing market correction is already underway in some European countries, for instance, in the Czech Republic, Denmark, as well as in Sweden where house prices declined more than 6% in 2022,” the Fund said.
    “House price declines could accelerate if markets reprice inflation risks and financial conditions tighten more than expected. These price declines would have adverse effects on household and bank balance sheets,” the IMF added.
    Mortgage payments might go up as well, as central banks increase interest rates in efforts to reduce inflation levels. Consequently, mortgage holders may have less disposable income to spend, and, in some cases, could even reach a point where they are unable to repay their credits. Banks could also struggle in an environment where repayments are not made.
    “Empirical models linking house prices to their fundamental drivers point to an overvaluation of 15–20% in most European countries. Therefore, with mortgage rates still on the rise and real incomes dented by inflation, house prices have been declining recently in many markets,” the Fund said.

    Data from Europe’s statistics office Eurostat showed house prices dropping for the first time since 2015. Across the European Union, house prices fell 1.5% in the fourth quarter of 2022 from the previous three-month period.

    “General house price issues are across the board, not just in high debt countries, and they need to be tackled with supervision. They need to be tackled with stress tests, they need to be watched very carefully,” Alfred Kammer, director of the European department at the IMF, told CNBC in Sweden.

    Sticky Inflation

    At the same time, estimates point to further challenges with inflation. The IMF expects headline inflation to average 5.3% in the euro zone this year and 2.9% next year — above the European Central Bank’s target of 2%.
    “The ECB needs to be increasing interest rates relatively early and need to maintain those through at least mid-2024. We expect to come back to the inflation target of 2% during 2025,” Kammer told CNBC.
    The European Central Bank is due to meet next week, and one of its members has recently suggested that a 50 basis point increase is not off the table. The central bank embarked on a hiking path in July 2022, when it brought its main rate from -0.5% to 0. The ECB’s main rate is currently at 3%.
    The latest inflation print in the euro zone showed the headline rate falling to 6.9% in March from 8.5% in February. Core inflation, which excludes energy and food costs, showed a slight increase over the same period.
    “Further tightening is required, and when the terminal rate has been reached, that terminal rate needs to be maintained for longer, because core inflation is (…) high, and it’s very persistent. And there’s nothing worse than pausing an inflation fighting effort too early, or abandoning it too early because if you need to do it a second time, the costs to the economy are so much larger,” Kammer said.
    In Sweden, where house prices have come down significantly last year, inflation expectations also suggest that the central bank has more room to go in terms of rising rates. Headline inflation is seen at 6.8% this year and 2.3% next year, according to the IMF’s latest figures.
    The picture is also similar in the U.K. with headline inflation set to reach 6.8% this year and 3% in 2023.
    Amid these forecasts, the IMF suggested that central banks have no choice but to press ahead with further rate hikes.
    “High and potentially more persistent than expected underlying inflation calls for tight monetary policy, until core inflation is unambiguously on a path back to central bank inflation targets,” the Fund said. More

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    Stress Builds as Office Building Owners and Lenders Haggle Over Debt

    A real estate investment fund recently defaulted on $750 million of mortgages for two Los Angeles skyscrapers. A private equity firm slashed the value of its investment in the Willis Tower in Chicago by nearly a third. And a big New York landlord is trying to extend the deadline for paying down a loan for a Park Avenue office tower.Office districts in nearly every U.S. city have been under great stress since the pandemic emptied workplaces and made working from home common. But in recent months, the crisis has entered a tense phase that could damage local economies and cause financial hits to real estate investors and scores of banks.Lenders are increasingly reluctant to make new loans to owners of office buildings, especially after the collapse of two banks last month.“They don’t want to make new office building loans because they don’t want more exposure,” said Scott Rechler, a New York landlord who is a big player in the city’s office market and sits on the board of the Federal Reserve Bank of New York.The timing of the pullback in lending couldn’t be worse. Landlords need to refinance about $137 billion of office mortgages this year and nearly half a trillion dollars in the following four years, according to Trepp, a commercial real estate data firm. The Federal Reserve’s campaign to fight inflation by raising interest rates has also substantially raised the cost of loans still on offer.Banks’ unwillingness to lend and building owners’ desperation for credit have created a standoff. Lenders want to extend loans and make new ones only if they can get better terms. Many landlords are pushing back, and some are threatening to default, effectively betting that banks and investors stand to lose more in a foreclosure. Blackstone slashed the value of the Willis Tower in Chicago by 29 percent. Lyndon French for The New York TimesThe Willis Tower, formerly the Sears Tower, is the third tallest in the country.Lyndon French for The New York TimesHow private negotiations between lenders and building owners are resolved could have major ramifications. Defaults could heap pressure on regional banks and help push the economy into recession. Local property tax revenue, already under pressure, could plummet, forcing governments to cut services or lay off workers.“What we are seeing is this dance between lenders and owners,” said Joshua Zegen of Madison Realty Capital in New York, a firm that specializes in financing for commercial real estate projects. “No one knows what the right value is. No one wants to take a building back,” he said, adding that building owners don’t want to put in new capital, either.He added that the office sector was feeling far more stress than other kinds of commercial real estate like hotels and apartment buildings.Some industry experts are optimistic that given enough time, building owners and their lenders will hammer out compromises, avoiding foreclosures or a big loss in property tax revenue because everybody wants to minimize losses.“I don’t see it as something that is going to result in systematic risk,” said Manus Clancy, a senior managing director at Trepp. “It’s not going to bring down banks, but you could see some banks that have problems. Nothing gets resolved quickly in this market.”Loans on commercial buildings are typically easier than home mortgages to extend or modify. Negotiations are handled by bank executives or specialized finance firms called servicers, which act on behalf of investors that own securities backed by one or more commercial mortgages.But striking a deal can still be hard.Mr. Rechler’s company, RXR, recently stopped making payments on a loan it used to finance the purchase of 61 Broadway in downtown Manhattan. His company got its original investment in the building back after selling nearly half its stake to another investor several years ago, he said. He added that the lender, Aareal Bank, a German institution, was considering selling the loan and the building.“In this illiquid market, can they sell that loan? Can they sell the building?” Mr. Rechler said. Aareal Bank declined to comment.Blackstone bought Willis Tower for about $1.3 billion in 2015.Lyndon French for The New York TimesAnd it committed to spending $500 million on renovating the 50-year-old building.Lyndon French for The New York TimesEric Gural is a co-chief executive of GFP Real Estate, a family-owned firm that has stakes in several Manhattan office buildings, mostly older ones. He has been embroiled in nearly seven months of negotiations with a bank to extend a $30 million loan on a building in Union Square, and just two months are left on the mortgage.“I’m trying to get a one-year extension on an existing loan so I can see what interest rates look like next year, which is likely to be better than they are now,” Mr. Gural said. “Hybrid work has created fear in the banks.”Though many workers have returned to offices at least a few days a week, 18.6 percent of U.S. office space is available for rent, according to Cushman & Wakefield, a commercial real estate services firm, the most since it started measuring vacancies in 1995.Public pension funds, insurance companies and mutual fund firms that invest in bonds backed by commercial mortgages also have an interest in seeing problems resolved or put off. A wave of foreclosures would lower the value of their securities.Many of the mortgages that analysts are most worried about involve buildings in Chicago, Los Angeles, New York, San Francisco and Washington — cities where there is a glut of vacant space or where workers are reluctant to return to offices.One such property is the 108-story Willis Tower in Chicago — the third-tallest building in the country, after One World Trade Center and Central Park Tower, both in Manhattan. The giant private equity firm Blackstone bought it for about $1.3 billion in 2015 and committed to spending $500 million on renovating the 50-year-old building, formerly the Sears Tower, including adding retail space and a rooftop terrace.But in December, United Airlines, the building’s largest tenant, paid an early termination fee and vacated three floors; the company still occupies 16 floors. That month, about 83 percent of the building was occupied, according to KBRA Analytics, a credit data and research firm. Blackstone disputes those numbers; Jeffrey Kauth, a company spokesman, said that “approximately 90 percent of the office space is leased.”Blackstone recently notified some of its real estate fund investors that it had written down the value of its equity investment in Willis Tower by $119 million, or 29 percent, said a person briefed on the matter, who spoke on the condition of anonymity to discuss sensitive financial information. In March, Blackstone got a fourth extension on the $1.33 billion mortgage, pushing the due date to next year, according to Trepp. Under the terms of the loan, the firm can seek another one-year extension next year.The loan on the Gas Company Tower in downtown Los Angeles is in default.Tag Christof for The New York TimesA loan default sets up 777 Tower for potential foreclosure or sale.Tag Christof for The New York TimesBlackstone said only around 2 percent of the firm’s real estate funds were invested in office buildings — down a lot from a decade ago.Even streets with some of the priciest real estate in the country are not immune.In Manhattan, the owner of 300 Park Avenue, an office building across the street from the Waldorf Astoria, is seeking a two-year extension on a $485 million loan coming due in August, according to KBRA Analytics. The property is owned by a joint venture including Tishman Speyer and several unnamed investors.The 25-story building, built in 1955, is the headquarters for Colgate-Palmolive. But the consumer products conglomerate is shrinking its presence there.“We requested that our loan be transferred to the special servicer well in advance of its maturity so that we can work together on a mutually beneficial extension,” said Bud Perrone, a spokesman for Tishman Speyer.Portions of a bond deal that includes the 300 Park Avenue loan were downgraded last fall by Fitch Ratings because some tenants had left the building, and a lower-rated slice of the bond now trades at about 85 cents on the dollar.Across the country, an investment fund connected to the real estate giant Brookfield Properties defaulted on $750 million of loans for the Gas Company Tower and a nearby building, 777 Tower, in downtown Los Angeles, setting up a possible foreclosure or a sale of the properties, according to the fund.Andrew Brent, a spokesman for Brookfield, said in an emailed statement that office buildings suffering financial challenges were “a very small percentage of our portfolio.”Even as building owners struggle with vacancies and high interest rates, some have found a way to put their properties on a more solid footing.The owners of the Seagram Building in Manhattan have been working to refinance a portion of a loan that comes due in May.Haruka Sakaguchi for The New York TimesNew tenants are needed to fill several floors that Wells Fargo occupied in the Seagram Building.Haruka Sakaguchi for The New York TimesRFR Holding, an investment group that bought the Seagram Building in 2000, is trying to lure tenants back to the office.Haruka Sakaguchi for The New York TimesThe owners of the Seagram Building at 375 Park Avenue in Manhattan have been working to refinance a $200 million portion of a loan that comes due in May while finding new tenants to fill several floors previously occupied by Wells Fargo.RFR Holding, an investment group led by Aby J. Rosen and Michael Fuchs, bought the 38-story building in 2000 for $379 million. To entice employees back to the office, RFR last year built a $25 million “playground” in an underground garage that’s equipped with a climbing wall and pickleball and basketball courts. Four new tenants signed leases in the past few months, according to Trepp.Even with all the vacant space, some landlords like Mr. Rechler’s RXR still want to build new towers. RXR is moving ahead with plans to build what could be one of the tallest buildings in the country at 175 Park Avenue.“It’s one of a kind in what is and will always be one of the best office markets in the world,” he said, referring to the tower. More