Low interest rates prop up prices

Lower mortgage rate translates into more purchasing power, so typically lower mortgage rates do translate into higher prices....

Except this time is different. Credit Standards are tighter and there is more supply so the relationship isn't holding at the moment. Right now the lower rates is mainly being directed toward refis.

By the time rates are up that may mean economy doing better, wall st doing better, etc. so not necessarily negative overall environment for nyc re.

Mayabe it's because I bought a house in 1981 when mortgage rates were 16%. Nobody really saw that coming either. At that time I was able to assume an existing 7% VA mortgage, which made the property very attractive. Those days are long gone, but it wasn't that long ago that an 8 or 9% mortgage was considered a good rate.

Yes it will hurt prices.

It seems difficult to compare Manhattan RE prices to many other parts of the country. Where else would someone spend more than 1 million dollars on a very small apartment? Many people with regular jobs and regular incomes can't afford to buy in Manhattan. Lower interest rates will help some people who were on the fence about buying but overall it's a very expensive marketplace where you get very little value for your money.

So now interest rates don't matter in NYC RE? Smoking some good crack. The vast majority of apts below $5mm are financed - don't kid yourself. Even Gross has said mortgage rates should be 8-9% - that will cut prices in half because I can guarantee you that incomes will not go up more than 5% per year and more likely 2-3%.

Today more apartments than ever require 30-40% down versus 0-20% a few years ago. The availability of credit can be as-important as the actual mortgage rates.

THough it may not have had it's own dedicated thread, it's been addressed many times in many other threads.
It has to affect.
Here's a small scale of the impact of interest rates on a 30 year, 1 million dollar mortgage.
4.0% $4774
4.5% $5066
5.0% $5368
5.5% $5675
6.0% $5995
6.5% $6320
7.0% $6652

So if interest rates go up 1%, and your paying another roughly $600 per month, what's that worth to you in the total price?
For every $1000 per month, you'll hear arguments between 150K to 300K.
Same logic/arguments that apply to excessive monthly maintenance.

And this is the pitfall of tax abatements. If you buy in year 5 of a 10 year tax abatement and are looking to sell in year 10, your potential buyer has an extra $XXXX per month calculating against your sale price.

I'd rather buy something with no tax abatement and get the apartment cheaper against the monthly carry and stick with the devil you know.

"overall it's a very expensive marketplace where you get very little value for your money."

But the marketplace only gets to be very expensive if people see value for money in buying (or renting) here. You're just paying for (a.k.a., putting value on) different attributes here vs., for example, the suburbs - location vs. size of living space being the classic trade-off.

Of course as a home owner you have the priviledge of paying real estate taxes to pay for out of control government spending.

Although low interest rates may be somewhat of a plus, it's important to realize that low interest rates are often low for a reason - very sluggish economy. And they do not automatically imply stronger housing prices.

Japan has even lower interest rates that the U.S. (10-year government bonds at 1.13%) and their housing prices have declined for well over a decade.

Caveat emptor.

we live in japan....if it's not clear to you now it will be soon

There are important similarities - huge debts, need to deleverage, huge pending unfunded entitlement spending.

A key advantage we do have over Japan is that our population is expected to continue to grow while their's is already declining and expected to continue to decline. That's a big deal when the percent of population who is retired is growing rapidly.

So, I'm with the PIMCO New Normal school of thinking. Subpar growth extending out for many years - probably averaging around 2% per annum - barely enough to reduce unemployment rate.

"No-Interest Mortgages? No Chance
Still, 0% Is Thought-Provoking as Housing Slump Goes On Despite Low Rates"

"Think about it: 0% financing has long worked as an incentive in the auto industry. And home builders have been known to pay down mortgage rates for their buyers, so these days it wouldn't be unheard-of for them to entice people with a 2% or 3% mortgage rate, at least for a period of time"

http://online.wsj.com/article/SB10001424052748704791004575519913915143970.html?mod=WSJ_RealEstate_LeftTopNews

I could see interest rates edging down a little further, but nowhere near zero though. Right now you can get 4.0% through SONYMA. Near-zero interest rates would definitely get people off the fence, definitely those looking at the lower end of the market.