Will lower interest rates lead to stabilization of prices???

Also, does anyone know when jumbos will come down?

I think its a little too late for that.... rates haven't been particularly high for a while, and we managed the fastest 20% dip in the nation here. Not saying it can't slow some of the decline, but its not going to offset it.

Layoffs, the loss of a HUGE chunk of NYC income, economy spanked, Wall Street era over, city and state problems and cutbacks that are only beginning.... the rate difference won't offset that.

Now that the crash numbers are in (the median decline numbers are pretty widespread) I think you're going to see the panic and fleeing from the market.

Also, not sure how I forgot to mention... but the majority of the nation is not going to qualify for these rates. You can make them negative rates, but if folks can't qualify for mortgages, or are underwater, they're not getting these rates.

nope, banks won't lend. Period! As a matter of fact interest rates won't solve the problem. Employment numbers and law of supply/demand. Don't fight the forces and laws of science/nature.

it will take years for the current mess to be cleaned up:

http://www.youtube.com/watch?v=5IeixTAzhjE

Of course interest rates will have an impact. Also, the 15-20% decline is only at the top of the market.

> Also, the 15-20% decline is only at the top of the market.

Huh? You're not reading the stat right. First off, its a 20% median decline. Median as in complete market, it is talking the center point of the market.

Second, if it was only a 15-20% at the top of the market, it would be a 20-25% decline at the bottom of the market.

The "its only at the top of the market" is a line a broker must have sold you... its simply not true.

It's mostly the overpriced NEW construction that is down. A well priced resale is NOT down 20% in the past quarter.

I guarantee you every bear here would post a billion articles about mortgage rates being the #1 factor if they were going up. Nobody here (with a brain) denies that nyc10022 would be posting 10 articles a day, were that the case.

Which makes it hilarious that the marginalize the news now, since rates are going down.

The problem was never rates. Rates haven't been high in almost a decade. The problem is credit. Buyers are liars. Everyone says they have plenty of cash and a stable income. We're all rich and good looking, of course. At least we used to be. Today, the banks are taking off the rose-colored glasses and using a microscope to examine for defects. I suspect most buyers are in denial. The same as people who know they're sick don't want to see a doctor. The people who think they can buy don't want to talk to a banker. Somehow I suspect that what can be bought with cash is much more than what can be bought with credit. I'm going to call my banker in the next week or so and see. Truth be told, I'm looking to buy. Not from a broker, not at auction.From the federal/state/local gov't. At $1. If you think I'm crazy, just take a time machine back to the late 80's, early 90's and check out the deals to be had.

The problem also continues to be affordability, job losses, negative wealth effect, and lack of confidence in the asset class. The fed is taking this unprecedented action because housing is falling hard. If you lose your job, or you are self employed and income drops drastically, or you have your own small business and profits are way down, or you lost 25%+ of your wealth and retirement funds in the markets, the fact that rates went from 5 7/8's to 5% doesn't make you want to run out and buy a house.

You cant make buyers buy and you cant force banks to lend.

Let's see how long they can keep rates this low? Remember we are a debtor nation to the tune of 9 trillion plus another 3 trillion this year!!!! How long can the FED borrow and the Treasury run the printing press before it all comes crashing down??? We couldn't finance a lemonade stand but yet we act like the rest of the world will keep buying our debt because we are so credit worthy..........
I also agree it's all about credit, most Americans are tapped out and won't qualify for many reasons now!

Money is no longer what you can borrow. It's what you have. In the land of the blind, the one-eyed man is king.

"It's mostly the overpriced NEW construction that is down. A well priced resale is NOT down 20% in the past quarter."

Wishful thinking, hotproperty, but you are wrong. Resales actually started falling BEFORE new construction... which was masking the decline.

And, there have already been countless anecdotal examples of resales down over 20%. I don't know what "well priced" means. We're talking about selling for 20% less than it did before.

Seems pretty clear to me that you are describing what you WISH were the case, not what is actually happening.

"Also, the 15-20% decline is only at the top of the market."

"It's mostly the overpriced NEW construction that is down. A well priced resale is NOT down 20% in the past quarter."

hotproperty, this is total brokerspeak. Complete lines of BS. We heard these rationalizations months ago.

Where exactly are you getting this stuff from?

The data completely contradicts this stuff....

Urbandigs, I totally agree. I got a jumbo loan locked in 4.75% just last week, but it is not keeping me from walking away from my deposit.

where did you get a 4.75% jumbo?

for those who don't get that the crash is in, besides the median numbers linked to on this board, make sure to check out the comp sales...

http://www.streeteasy.com/nyc/talk/discussion/3339-if-you-can-demonstrate-market-movement-with-comps-please-post-here?last_page=true

hotproperty, if you still think its just the "high end" and "new construction", MAKE SURE you check it out...

lack of confidence in an asset class is the key phrase. If I almost KNOW I'll be able to get the same asset for a lot less in 6-12 months, why rush? Interest rates are not creeping up anytime soon, desperation in NYC RE has only started to make headlines in the popular press, whereas desperation in every other sense is prevalent. Nobody with a brain is going to step up and make an offer that is not a lowball, unless the property is already priced way below any comparable one.

Ruiz, how did you decide to walk away?

Is not only a matter of affording something, but rather of waiting in the almost certain hope of affording something more valuable.

I worked with guardhill. They found great options.

ok, nyc, I checked it out. How much lower than the $675,000 do you think this will go for in a year?

334 West 87th #4D (Jr. 2BR co-op; maint.$804)
StreetEasy History
07/27/2007 Previous sale closed for $807,500
05/03/2008 Listed in StreetEasy by Elliman at $829,000
06/13/2008 Price decreased to $799,000
08/01/2008 Price decreased to $775,000
10/10/2008 Elliman listing entered contract
12/08/2008 Sale closed for $675,000
Nice young Mormon MBAs try their hands at NY real estate, get burned.

"lack of confidence in an asset class is the key phrase. If I almost KNOW I'll be able to get the same asset for a lot less in 6-12 months, why rush? Interest rates are not creeping up anytime soon, desperation in NYC RE has only started to make headlines in the popular press, whereas desperation in every other sense is prevalent. Nobody with a brain is going to step up and make an offer that is not a lowball, unless the property is already priced way below any comparable one. "

Well said.

I think of it this way. We're down 20%. There is an excellent chance of things going down further, and possible significantly in the next 6-12 months. On the upside, I can't find anyone willing to call an increase, but lets even say a 1/3 chance of a 5% bounce... .which is SUPER generous.

I'll easily take the risk of 5% (less after inflation) for the more significant chance of an additional 10% or 20% decline. The risk/reward math is pretty straightforward.

RE markets don't bounce, and there are no V recoveries. There will not only be ample time to move, one also has to keep in mind that its not a liquid market, so even better deals than median decline are possible.

Waiting proved to be THE smart option a few months ago... and I think it is still true.

> ok, nyc, I checked it out. How much lower than the $675,000 do you think this will go for in a year?

hotproperty, note that thread has probably 100 examples... why look at just 1?

As for my predictions, I think I've said a few times... we're down 20%, given how fast I can't see how that doesn't hit 30% total... and i had to guess, its 35% total down. Which is another 20% from here.

That doesn't mean all apartments will do that, half will do more, half will do less.... but the deals will only be improving.

$820 psf... I also figure we're going to see UWS under $700 psf, possibly well under.

I just took the latest example. So you're saying a jr. 2 bed will go for $540,000.

> So you're saying a jr. 2 bed will go for $540,000.

Some, possibly, ones like these... but I think this is a lower-end example. I don't think the average will get that low. And I'm not sure this is 20% off peak in the first place.

You've got my prediction, do what you want with it. 35% off peak values.

ruiz - did you make the decision yet or are you still considering? I appreciate you sharing your thoughts on a public forum, given the situation. I just dont think rates is the problem here, but I do worry about unintended consequences of actions taken to make rates get this low and stay this low.

it might help to slow down the decline on prices. but as far as i can see, the only reason they were going up was the expectation of further appreciation. given that the expectation is now of future lower prices, prices will have to adjust to fundamentals. ie: get in line with rents that are going down themselves. prices will keep on chasing a moving target (falling rents) for a while, but instead of running, just walking.

like UD says, mind unintended consequences. prices will suffer once rates move up. so it's a bandaid in nyc that will deter price recovery within the next 4 years. in other mkts it might do a tiny contribution in terms of putting less people into FC in the short term. anyway, if you buy, ask for an adequate margin of safety.

It is amazing how people's biases make them lose objectivity. Of course the lower rates will be a positive factor in real estate values, especially if they drop to the 4.5% range and maintain for a decent period of time.

sorry LIC, you have to get real. believing it's going to pop up prices with unemployment going up in a fast way... when the fundamentals in the economy are very bad, cost of credit has much less impact than ability to pay.

you remind me of those that were telling me "buy stocks! IR are going down, that can only be bullish" when the Dow was at more than #12k. well, see how it went downwards non the less. sure, maybe it went down slowly than if the FED had taken no action.

that doesn't mean there's no positive effect. the positive effect is slowing down the pace of price declines. that IS a positive effect.

"It is amazing how people's biases make them lose objectivity. Of course the lower rates will be a positive factor in real estate values, especially if they drop to the 4.5% range and maintain for a decent period of time."

The question is how positive. In a frozen market like now, where rates have been so low for so long, and things are crashing anyway (because of an absurd bubble that is now deflating), it might make no difference. Who would have thought people would PAY for the right to keep their money in treasuries? Nothing makes sense now except fear. These rates may not (likely won't) make a dent.

Clearly it is a positive factor, but I think what folks are saying is it is an irrelevantly small one.

Have to agree with some of the above posters here - rates have been pretty low for some time now, which HAS helped buyers. But the issue now is credit, as well as having a larger down payment. I don't see this (or the slight increase in property taxes mentioned in another thread) having a truly significant effect on pricing or volume.

Jumbo's will stay high since they can't be bought by Freddie/Fannie and no investors will touch them...

Only way they come down is if the Fed starts buying them (which is possible if we keep going down this track)...but since they are looked at like "Upper Income" loans and the Dems are coming in power, I don't think you will see anything on the horizon to help this segment of the market....

And to the guy who got a 4.75% Jumbo (im sure you meant to say Conforming Jumbo)....borrowing from the Mob doesnt count

"Nice young Mormon MBAs try their hands at NY real estate, get burned."

Why do you have to bring religiion into this. And the way you described Mormons sounds creepy. I think I need to take a shower.

how about the fact that Fannie/Freddie just upped % sold requirements?

Thats probably going to have a bigger negative impact on NYC than the interest rates you can't get will have on the upside...

"how about the fact that Fannie/Freddie just upped % sold requirements?"

Agree totally as this should have a major impact on mid tier condos....but since most developements are Jumbo loans shouldnt this not have an impact...

Having said that, tightening credit conditions will have an impact....and with the banks getting ready for yet another capital call in the 1st Quarter they will not be loosened anytime soon...