Fed raising rates- here we go

That's what usually happens in my experience. What follows afterwards is the real question.

Steve, Market is slow as every one hears about the oversupply of new developments and feels that there is no rush to buy. On top of that the rents are soft. While the well-priced segment (less than $3mm and less than $1500 per sq ft) is pretty healthy, overall market will only get moving when there are stories about no more new developments coming on line which will not happen for at least one more year. In my opinion, it is a great time to buy less than $1500 per sq ft renovated properties in good areas. I would not buy $3k++ per sq ft but my pockets are not as big.

300, while I believe in the market psychology you describe, I also believe that Steve is correct. So in your under $1,500 psf category, rising interest rates should energize complacent buyers to get off their duffs and buy something before it's too late. I just don't believe that's a smart move given where I think prices are headed in the next 5 years. But if you can well afford it, have a stable job and expect to live in the same apt. for the next 10+ years, it's not that bad a time to buy.

I agree that it is good to buy for personal use in below $1500-1600 per sq ft renovated segment especially if you are going to keep your down payment in the stock market which could go down 40 percent if economy turns south and 10y interest rate come down. Than you would not have money to buy. If you bought now, you can refinance in recession and reduce your monthlies.

Than = Then

Overleveraging in this market could be a major financial mistake in this market no matter how low the interest rates. Buy only what you can afford as the wind may not be at your back.

Here's to 300_mercer and ximon to keeping these boards interesting. Thanks for the input and yes I agree the 1500-1600 market is doing well and the higher end is now stabilizing at a lower price point. The Fed is the Big Kahuna in every investment so every investor(equities, fixed, real estate etc) needs to watch what they do very carefully. Mortgage rates will be rising as the economy chugs along. Buyers now may want to realize that higher wages will bring in new buyers and higher rates will add to their monthly expense.

Thank you Steve. I am indeed seeing some good opportunities in prime NYC with very realistic prices. But they are selling fast once the prices become realistic.

At least for the part of NY that I follow, the market has been so slow that I doubt rising rates are going to increase demand even in the short term. If anything, it's going to suppress prices even more because people will have to offset the increased interest payment with a lower purchase price to stay within a monthly budget.

Some background facts: bought a 1-bedroom UWS luxury condo on Riverside Blvd in 2006 when the market was near its peak, the apartment has been rented out for the past 8 years. Due to high HOA and mortgage which the rent doesn't fully cover, the monthly carrying cost of the rental is about $1100. Missed a great opportunity to sell for a 200k profit in 2016, since 2017 prices have gone down quite a bit, many comparable units in the same building sit for months before they sell at a reduced price. Based on how similar units are selling, most likely will have to to sell at a reduced price and a meager $100k profit based on the current market.

Contemplating if I should list the apartment and try to sell this fall when tenant vacates (the main concern would be a potential carrying cost of $30k or more if the apartment sits empty while trying to sell)? Also considering the possibility of renewing the lease for another year then sell (the main concern is that the market will go down further in a year due to the new tax law and rising interest interest rates, making it even harder to sell)?

Would appreciate thoughts and input!

Those looking to buy now and in the near term will move more quickly as they do not want to be subject to higher mortgage costs. That's certainly what history tells us.

I agree. After tenant leaves, get the apt. in good show condition, properly stage it and then put it on the market in late Fall or Winter.

The Fed raising rates does not necessarily mean mortgage rates will rise immediately . Who knows, maybe not for sometime. Actually since the Fed raised rates last week the yield on the ten year note has gone down which translates into lower mortgage rates. Unless inflation takes off I don't see how mortgage rates can rise. And if the Fed overshoots and continues raising rates it could precipitate a recession. The bond market is sending a message to the Fed.

yes street but i think the fed is looking at how wages are now increasing and trying to be preemptive. Increasing wages are the first signs for inflation.

Annoying, looks like SE ate my original response. Here it is again.

SteveFR: Those looking to buy now and in the near term will move more quickly as they do not want to be subject to higher mortgage costs. That's certainly what history tells us.

That may be true, but there was a big jump in mortgage interest rates at the beginning of the year through April right before prime season, and it didn't seem to spark any demand. Perhaps there will be a turning point with a few more increases. I suppose one reason for this could be because prices haven't fully rationalized yet, so the impact of interest rates is minimized. E.g,, if you take an overpriced unit and add higher interest to it, that just makes a bad deal worse.

throughoutuws: If I read you correctly, you are losing $1.1k / month renting out your apartment, and you are comparing selling this year vs. next year? I'd set up a financial comparison of the two options and see what you'd have to believe to make holding worthwhile. FYI, don't forget the carrying costs you mentioned would apply to both scenarios - there's no guarantee that the apartment is going to sell immediately next year.

@SteveFR

Part of the reason for the wage increase was due to the fact that some states raised their minimum wage.

The Fed was way too hawkish last week.