Economy

Mortgage costs have jumped as the Federal Reserve has raised rates. With higher rates come fewer offers.Luis Solis, a real estate agent in Portland, Ore., marked a milestone weekend late last month. It was the first time in two years that one of his listings made it to Monday without any offers.This particular house was listed at $500,000, and after a Saturday open house there were promises of at least three bids, including one for $40,000 over the asking price. Then Monday came, and there were none. Then Tuesday, and Wednesday. An offer finally came in, but instead of being 10 to 15 percent higher than the listing — something that became almost standard at the height of the coronavirus pandemic’s housing market — it was right at $500,000. And it was the only one. And the buyer took it.“We didn’t have the competing offers that would drive up the price,” Mr. Solis said. “It’s not crazy like it was.”Taking some air out of the crazed market — and the hot economy in general — is precisely what the Federal Reserve wanted to do when it raised its key interest rate in March and signaled more increases to come. Mortgage rates have surged in response, jumping to 5 percent from slightly more than 3 percent since the start of the year.That rise means the monthly payment on a $500,000 house like the one Mr. Solis just sold would be about $500 more a month than it was at the end of last year, assuming a fixed-rate mortgage and 20 percent down payment. And the higher cost comes on top of a more than 30 percent rise in home prices over the past two years, according to Zillow.Now early data and interviews across the industry suggest that many buyers have finally been exhausted by declining affordability and cutthroat competition, causing the gravity-defying pandemic housing market to start easing up.Open houses have thinned. Online searches for homes have dropped. Homebuilders, many of whom have accrued backlogs of eager buyers, say rising mortgage rates have forced them to go deeper into those waiting lists to sell each house. In a recent survey of builders, Zelman & Associates, a housing research firm, found that while builders were still seeing strong demand, cancellations had inched up, though still well below historically low levels. Builders have also grown increasingly concerned about rising mortgage rates and surging home prices.“There is a lot more concern than there had been,” said Ivy Zelman, chief executive of Zelman & Associates.By any standard that prevailed before 2020, this would be a hot real estate market. Home prices remain high, and not only is there little sign they will fall anytime soon, but many economists predict a continued rise through the year. Still, after two years of torrid demand, agents had become accustomed to fielding multiple offers for each listing and setting price records each weekend. That frenzy, brought on by pandemic migrations and the growing centrality of the home as a space where people both live and work, is now subsiding.“We’re seeing some early indications that a growing share of home buyers, especially in expensive coastal markets, are getting priced out,” said Daryl Fairweather, chief economist at Redfin.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.For buyers, however, the market will still feel plenty competitive. Even if prices aren’t rising at the pace of the past two years, homes are selling within a week of being listed and posting no significant price declines.Construction in Missoula, Mont. Among homebuilders, “there is a lot more concern than there had been,” said Ivy Zelman of Zelman & Associates.Tailyr Irvine for The New York TimesThat rising mortgage rates have not had more of an effect shows how difficult it is to tamp down prices and bring demand into balance in an economy where a lack of supply — marked by half-empty car lots, furniture order backlogs and a paucity of homes for sale — is playing a guiding role.In the prepandemic world of bustling offices and smoothly functioning supply chains, such a steep rise in mortgage rates, on top of years of double-digit price appreciation, would have economists predicting a severe drop in demand and maybe even falling prices. Those trends would have echoed through the broader economy, with fewer people spending on moving vans and new couches, and as existing homeowners felt on less solid financial footing and potentially curbed their own spending. Instead, economists are predicting that prices will continue to rise — by double digits in some forecasts — through the year.“I don’t think it’s going to stop the housing market,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.The problem is there are so few homes for sale that even a slower market is unlikely to create enough inventory to satisfy demand anytime soon. For years the United States has suffered from a chronically undersupplied housing market. Home building plunged after the Great Recession and remained at a recessionary pace long after the economy and job market had recovered. Even today, the pace of home building remains below the heights of the mid-2000s, before the 2008 financial crisis and housing market crash.This makes it a good time to be a seller — assuming you don’t need to buy. Christopher J. Waller, a governor at the Fed, is living this out.“I sold my house yesterday in St. Louis to an all-cash buyer, no inspection,” Mr. Waller said in panel discussion on Monday. “But I’m trying to buy a house in D.C., and now I’m on the other side, going: ‘This is insane.’”He noted that the sharp rise in mortgage rates over recent months should have an effect on what happens with housing.The recent lack of new building was not for lack of interest. Members of the millennial generation, now in their late 20s to early 40s, are in their prime home buying years. Their desire to buy houses and start families has collided with scant supply, leading to an increase in prices.Shutdowns in the early months of the pandemic slowed home building, but housing starts have been on an upswing lately. New home completions remain low, however, because the tight labor market and supply chain disruptions have homebuilders scrambling to find wood, dishwashers, garage doors — and workers.Inflation F.A.Q.Card 1 of 6What is inflation? More

WASHINGTON (Reuters) – Ukrainian Prime Minister Denys Shmyhal and top Ukrainian finance officials will visit Washington next week during the spring meetings of the International Monetary Fund and World Bank, sources familiar with the plans said on Friday.Shmyhal, Finance Minister Serhiy Marchenko and central bank governor Kyrylo Shevchenko are slated to meet bilaterally with finance officials from the Group of Seven countries and others, and take part in a roundtable on Ukraine to be hosted by the World Bank on Thursday, the sources said.Thursday’s event will be the first chance for key Ukrainian officials to meet in person with a host of financial officials from advanced economies since Russia’s invasion of Ukraine on Feb. 24. Spillovers from Russia’s war in Ukraine are expected to dominate next week’s meetings of senior economic officials from World Bank and IMF member countries, as well as the G7 and G20, with the IMF poised to downgrade its forecast for global growth as a result of the war.Russian President Vladimir Putin sent his troops into Ukraine on what he calls a “special military operation” to demilitarise and “denazify” Ukraine. Kyiv and its Western allies say those are bogus justifications for an unprovoked war of aggression that has driven a quarter of Ukraine’s 44 million people from their homes and led to the deaths of thousands. Thursday’s meeting will be more of a roundtable than a donors conference, although both the IMF and World Bank have set up separate accounts to be able to process and relay donations, and additional pledges are expected to be announced next week.It will give officials a chance to discuss the physical devastation and economic consequences of the war, as well as the continued functioning of Ukraine’s banking and financial sector.”Without support now, there will be no reconstruction in the future,” one of the sources said. The World Bank had no immediate comment on the event.World Bank President David Malpass told an event in Warsaw this week that the bank was preparing a $1.5 billion support package for Ukraine.The IMF’s executive board last week approved creation of a new account giving bilateral donors and international groups a secure way to send financial resources to Ukraine.Canada, one of Ukraine’s main supporters, has proposed disbursing up to $1 billion Canadian dollars through the new account, which will be administered by the IMF.The account will allow donors to provide grants and loans to help the Ukrainian government meet its balance of payments and budgetary needs and help stabilize its economy as it continues to defend against Russia’s deadly invasion.Marchenko last week said his government was seeking about 4 billion euros ($4.37 billion) in foreign financing in addition to the about 3 billion euros it has already received to deal with a budget shortfall. More

The Biden administration will restart oil and gas leasing on federal lands as it comes under increasing pressure to bring down high petrol prices, backing away from a freeze that had riled industry executives. Around 144,000 acres of public lands will be put up for sale next week, the interior department said on Friday, marking the end of a moratorium on new leases imposed by the president in one of his earliest acts in office. In June last year, a federal court in Louisiana ordered the Biden administration to restart the leasing programme.The new leases will charge higher royalty payments from oil and gas producers than before — 18.75 per cent compared with 12.5 per cent previously — and significantly cut back on the amount of land that will be auctioned compared to what the industry had asked for.“Today, we begin to reset how and what we consider to be the highest and best use of Americans’ resources for the benefit of all current and future generations,” said Deb Haaland, interior secretary.The move comes as President Joe Biden finds himself under intensifying political pressure over high fuel prices, which have driven soaring inflation. The national average price of gasoline on Friday was $4.07 a gallon, down from a recent high last month of $4.33 a gallon, but still more than 70 per cent higher than when the president took office.Biden has pulled various levers at his disposal in an effort to bring down prices. Earlier this month he announced an unprecedented release of 180mn barrels of crude from the government’s strategic stockpiles, which contributed to a recent decline in global oil prices. He has also leaned on allies in the Gulf and American oil and gas producers to raise output, though without much success. The leasing announcement comes just days after the administration’s latest effort to temper prices by lifting seasonal restrictions on ethanol blends in petrol. The energy crisis has taken precedence over the administration’s climate agenda in recent months, frustrating environmentalists.Combating climate change was central to the president’s election campaign, and he had pledged on the trail that there would be “no more drilling” on public lands if he were elected. In January 2021, he signed an executive order freezing new lease sales on the country’s 245mn acres of public lands pending a review. A report published by the interior department last November suggested that the system should be overhauled.Oil and gas production from federal onshore lands makes up less than 10 per cent of total US output and restarting leasing that will take months if not years to yield new output is unlikely to make a big difference to global oil prices, analysts say.Frank Macchiarola, senior vice-president at the American Petroleum Institute, the oil industry’s largest lobbying group, said he welcomed the restarting of leasing but said holding back acreage and raising royalty rates could “discourage oil and natural gas investment on federal lands”.“We are concerned that this action adds new barriers to increasing energy production, including removing some of the most significant parcels,” said Macchiarola. More

Environmental groups such as Extinction Rebellion and Just Stop Oil have been staging daily protests in London and across the country which have mainly been focused on oil facilities.Navigator Thames, ExxonMobil and Valero have now secured civil injunctions to allow them to minimise disruption and prevent further problems, Britain’s business department said.”While we value the right to peaceful protest, it is crucial that these do not cause disruption to people’s everyday lives,” energy minister Greg Hands said.”That’s why I’m pleased to see oil companies taking action to secure injunctions at their sites, working with local police forces to arrest those who break the law and ensure deliveries of fuel can continue as normal.”The opposition Labour Party has been calling for nationwide injunctions to stop the activists, who want the government to commit to ending all new fossil fuel infrastructure immediately, saying their protests were leading to shortages at fuel stations.As well as targeting oil refineries and depots, demonstrations have been staged at the London base of oil firm Shell (LON:RDSa) and at the Lloyd’s of London headquarters. In their latest action on Friday, activists said they had blocked off four bridges in central London. Police have arrested 600 people since the protests began this month.The government secured injunctions last year to stop protesters blocking motorways and major roads in London and the southeast. More

Ksenia Yudayeva said the Russian economy and its financial sector were in good shape before Feb. 24, and now many companies were experiencing the need to find new suppliers and logistics.The Russian financial sector and economy have taken a hit from sweeping western sanctions imposed over what Moscow calls a “special military operation” in Ukraine. More

MANCHESTER, England (Reuters) – A consortium led by Chicago Cubs owners the Ricketts family has pulled out of the running to buy Premier League club Chelsea, the family said on Friday, leaving three bidders remaining.Final bids for the club, which was put up for sale by owner Roman Abramovich following Russia’s invasion of Ukraine before sanctions were imposed on the oligarch by the British government, were submitted on Thursday. The Ricketts family, who had partnered with U.S. billionaires Ken Griffin and Dan Gilbert, submitted a cash-only offer and had been included on the four-bid shortlist produced by U.S. Bank Raine Group, who are overseeing the sale.”The Ricketts-Griffin-Gilbert Group has decided, after careful consideration, not to submit a final bid for Chelsea F.C,” the statement read. “In the process of finalising their proposal, it became increasingly clear that certain issues could not be addressed given the unusual dynamics around the sales process. We have great admiration for Chelsea and its fans, and we wish the new owners well.”The Ricketts family’s surprise withdrawal leaves groups led by LA Dodgers part-owner Todd Boehly, former Liverpool chairman Martin Broughton and Boston Celtics co-owner Steve Pagliuca as the remaining Chelsea bidders.The Ricketts family had met with supporters groups after it emerged that the Chelsea Supporters’ Trust (CST) said that 77% of its members did not support their bid for the club. The reaction was in response to leaked emails from 2019 in which American businessman Joe Ricketts described Muslims as his “enemy”. Joe was not involved in the Chelsea bid, with daughter Laura and son Tom fronting the consortium.However sources close to the deal told Reuters that their withdrawal was not as a result of the fan reaction, but due to differences between the parties within the consortium.They had outlined a list of commitments if their bid to buy Chelsea was successful, saying they would never allow the Premier League club to participate in a European Super League while also exploring the option of redeveloping Stamford Bridge. More

Russian and Belarusian trucks are stuck in long queues at the EU’s eastern borders as hauliers try to get out of the bloc, hours before a ban on their vehicles comes into force on Saturday.Lorries are backed up for more than 40km in Poland and have been waiting between three and 10 days to leave, according to people in the logistics industry, who say thousands of trucks are affected after Brussels imposed sanctions on the Russian and Belarusian fleets.Jan Buczek, head of Poland’s ZMPD, a trade body for Polish transport groups, said that in recent days the queue at the Koroszczyn border crossing into Belarus — which lies on the main route from Berlin to Moscow — had reached 80km.“There is no way the Belarusian and Russian trucks will all manage to leave Polish territory by tomorrow,” he said.According to data from Poland’s National Revenue Administration, the wait at the Koroszczyn crossing was 33 hours on Friday morning, while at the more northerly Bobrowniki checkpoint it was 56 hours. Haulage groups said there were also long queues at border crossing points in Lithuania and Latvia.The EU introduced sanctions this month prohibiting trucks operated by Russian or Belarusian companies from entering or remaining in the bloc, with exemptions for vehicles transporting food, medicine, mail and energy. It set a deadline of April 16 to exit the bloc. The sanctions were part of the EU’s latest attempt to punish Russia for its invasion of Ukraine.With customs officials making rigorous checks on vehicles crossing the border, thousands of vehicles could fail to make it out in time and would be at risk of being seized by national authorities.The situation has been exacerbated because a crossing between Poland and Belarus at Kuznica has been closed since Belarus’s authoritarian regime orchestrated a migration crisis on its borders with the EU last winter.Aliaksandr Kuushynau, a senior executive at Gurtam, which provides software for GPS fleet tracking, said that according to his company’s data about 10,000 Russian and Belarusian vehicles were still in the EU. “These vehicles will not make it back into Russia in the next few days,” said Kuushynau.Another industry source said: “It’s a tricky situation. We think there are at least a few thousand [Russian and Belarusian trucks] still in the EU.”Buczek said that roughly 3,000 Polish trucks in Belarus and Russia could be put at risk by any action against the Russian and Belarusian lorries waiting at the Polish border.“We should look for a benign solution, because any aggressive form of action by Europe against the Russian and Belarusian trucks at the border will instantly spark retaliation against our trucks that are on the way or coming back from markets like Mongolia, Kazakhstan and Uzbekistan,” he said.Luis Gomez, president of Europe at XPO Logistics, one of the world’s biggest trucking companies, said the situation could put further strains on the haulage sector in Europe but would probably have less impact than the exodus of 100,000 Ukrainian drivers from an industry already suffering from staff shortages. More

For the past year, politicians and policymakers have watched the rising inflation on both sides of the Atlantic with growing disquiet. Rapidly increasing prices are the unavoidable result of the pandemic, they have said, before adding that at least the situation is nothing like the disastrous inflation of the 1970s.They need to have a closer look at the evidence. Consumer price inflation in March hit a fresh 40-year high of 8.5 per cent in the US this week and a 30-year high of 7 per cent in the UK. It has two main causes, and bears many similarities to the first oil shock of late 1973, when Opec states enforced an oil embargo against countries supporting Israel in the Yom Kippur war. Then, as now, both the US and UK labour markets were showing signs of excess demand. America’s unemployment rate fell to 3.6 per cent in March, only one-tenth of a percentage point higher than its lowest rate in over 50 years, allowing employees to bid up wages to an annual increase of 5.6 per cent. In the UK, the latest labour market figures this week showed an unemployment rate of 3.8 per cent, the lowest since 1973, an all-time record for the number of job vacancies. Total pay rose annually by 5.4 per cent. Compounding domestic excess demand in labour markets is a global supply shock, raising the price of fuel and energy. In the mid-1970s, the cause was a powerful cartel of oil producers seeking to punish the west. This time round, the culprits are stretched supply chains resulting from the lasting effects of the pandemic alongside a widespread desire to limit gas purchases from Russia. Adding to these global constraints on supply are signs of a lasting domestic hangover from Covid in the labour market, which has reduced the numbers of people ready and willing to work in both the US and UK. Inflation in the US and the UK is therefore both a demand-pull and a cost-push phenomenon, just like it was in the 1970s, requiring us all to relearn the lessons of that decade. The first, which has been a painful experience for President Joe Biden, is that there can be nasty economic and political consequences of running a high pressure economy. Stimulating demand was thought to be a policy with few downsides because it would increase employment, re-engage the marginalised with the labour market and raise real wages. But we have come to relearn that excessive fiscal and monetary stimulus alongside rapidly growing employment and nominal wages do not make middle-class Americans better off in aggregate if prices rise faster than incomes. Worse, those that are poorer give you no credit for helping other people into work if their struggles mount. Despite the UK’s extremely strong labour market, real household disposable incomes are on track this year to suffer their largest fall since comparable records began in 1956. The second lesson was reiterated by one of the founding fathers of the European single currency this week. Criticising the European Central Bank for being too slow to increase interest rates, Otmar Issing noted that the Bundesbank was by far the most successful in the 1970s when it acted decisively to bring inflation down and West Germany suffered only a mild downturn. “The Fed waited too long”, he said, resulting “double-digit inflation and a deep, deep recession”. The UK authorities made even greater mistakes. Given the history and the current circumstances of excess demand, it is evident that the Federal Reserve and the Bank of England need to tighten monetary policy considerably, removing much of the stimulus that currently exists. The difficulty, as Issing himself noted, was knowing how much to remove and how quickly. The global supply shock element of higher energy, fuel and food prices will naturally reduce domestic demand, and by more in countries, such as the UK, which are net importers of these products. Sadly, this brings us to the third and final lesson of the 1970s. Calibrating policy as successfully as the Bundesbank did back then is extremely difficult and will require as much luck as judgment. The risk of recession on both sides of the Atlantic is now very high. Perhaps it is already too late, the inflation genie is out of the bottle and monetary policy needs to generate a recession to drive it out of the system. Alternatively, policymakers will be too cautious, too slow and allow inflation to persist and embed itself in the economy with the same ultimate consequences. The path we all desire is narrow and sits in between these economic disasters. It is possible we will eradicate high inflation without a deep economic downturn, but the odds on this favourable outcome are now low indeed. [email protected] More