A rebound in Chinese demand won’t shoot oil prices higher, Citi’s commodities chief told Bloomberg TV.
“The only way to get oil back to 110 [dollars] or 120 is to have a bunch of supply disruptions from place like Libya, Nigeria and maybe even Iran and Iraq.”
The 12 best cities to weather a housing-market downturn when a recession strikes
The economy is reeling amid fears of an upcoming recession.
As mortgage rates rise and uncertainty spreads, home prices have declined across the country.
Home value downturns will escalate in the trendiest hotspots, while other markets will show more resilience.
“If the U.S. does enter a recession, we’re unlikely to see a housing-market crash like in the Great Recession because the factors affecting the economy are different,” Sheharyar Bokhari, a senior economist at Redfin, said in a housing report. “But a recession — or even a continued economic downturn that doesn’t reach recession levels — would impact some local housing markets more than others.”
Redfin researchers looked at several indicators to rank cities on their chances of a housing market downturn in the case of a US recession. The fear, in this case, is that as the broader economy tightens, some home values may decline leaving homeowners holding a mortgage for more than the value of their investment.
Bokhari says it’s most likely to happen in popular migration destinations as demand from relocators and second-home seekers tends to fall during an economic downturn — a trend that has already begun. According to Redfin, demand for vacation homes has already fallen significantly following last year’s pandemic-driven boom.
“As monthly mortgage payments skyrocket, buyers are quicker to back away from second homes than primary homes,” Taylor Marr, deputy chief economist at Redfin, said in a statement. This opens up the market for buyers that remain and leaves them room to negotiate lower prices.
With buyer demand waning, Redfin’s data shows cities with rapidly rising home prices are more at risk of downturn. However, less trendy and more affordable markets — mostly those in the Rust Belt region — remain resilient. This could mean real estate investments in these areas stand a better chance of weathering a housing slump if the US enters a recession.
12. Chicago, Illinois
Price growth in 2021, year-over-year: 11.7%Average home loan to value ratio: 86%The percent of homes flipped in 2021: 1.8%
11. Columbus, Ohio
Price growth in 2021, year-over-year: 13.5%Average home loan to value ratio: 85%The percent of homes flipped in 2021: 3.4%
10. Rochester, New York
Price growth in 2021, year-over-year: 12.6%Average home loan to value ratio: 85%The percent of homes flipped in 2021: 2%
9. Kansas City, Missouri
Price growth in 2021, year-over-year: 10.9%Homes flipped: There are currently 51 fixer upper homes for sale in El Paso.
8. Buffalo, New York
Price growth in 2021, year-over-year: 17%Average home loan to value ratio: 86%The percent of homes flipped in 2021: 2.6%
7. Boston, Massachusetts
Price growth in 2021, year-over-year: 12.2%Average home loan to value ratio: 79%The percent of homes flipped in 2021: 1.2%
6. Cincinnati, Ohio
Price growth in 2021, year-over-year: 13.9%Average home loan to value ratio: 87%The percent of homes flipped in 2021: 3.9%
5. Cleveland, Ohio
Price growth in 2021, year-over-year: 9.5%Average home loan to value ratio: 86%The percent of homes flipped in 2021: 2.5%
4. El Paso, Texas
Price growth in 2021, year-over-year: 13.9%Homes flipped: There are currently 107 fixer upper homes for sale in El Paso.
3. Montgomery County, Pennsylvania
Price growth in 2021, year-over-year: 11%Average home loan to value ratio: 83%The percent of homes flipped in 2021: 1.8%
2. Philadelphia, Pennsylvania
Price growth in 2021, year-over-year: 10.1%Average home loan to value ratio: 86%The percent of homes flipped in 2021: 2%
1. Akron, Ohio
Price growth in 2021, year-over-year: 7.9%Average home loan to value ratio: 87%The percent of homes flipped in 2021: 2.7%
13/13 SLIDES
While China’s demand for oil has picked up since the summer, it’s falling in other top markets, he added.
A resurgence in Chinese demand won’t be enough for a steep increase in oil prices, according to Citigroup’s global head of commodities research.
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China’s zero-COVID policies have kept a lid on oil prices, though signs of them easing have raised hopes for a rebound in economic activity. But instead of demand, oil prices will follow supply signals, Ed Morse said.
“The only way to get oil back to 110 [dollars] or 120 is to have a bunch of supply disruptions from place like Libya, Nigeria and maybe even Iran and Iraq,” he told Bloomberg TV.
On Wednesday, Brent crude prices were up 1.4% at $96.01 per barrel, and West Texas Intermediate rose 1.7% to $89.90.
To be sure, an uptick in China’s oil appetite will impact the market, while OPEC+ is trying a establish a floor on prices with its production-quota cuts, Morse said.
“But we’re in a world where demand is sloshing downward across the world, whether you look at the US or Europe,” he added.
By contrast, China’s oil imports are up by 2 million barrels a day since the middle of the summer. But since the OPEC+ meeting, where members slashed quotas by 2 million barrels a day, oil prices have been “in a sideways little dance — it’s not going anywhere,” Morse said.
“I think there’s ample supply in the market for us not to have a big impact from China coming back,” he said.
