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The Federal Reserve Board in DC, as well as the Federal Reserve Bank of New York, have maintained outrageously low interest rates for 15 years. This is defacto printing money, and it's causing record homelessness in coastal cities as the extreme decline in housing prices.
Raise interest rates enough to feel it, and that would be end of high housing prices in NYC. Some people would lose their jobs and not be able to pay their mortgages or rents, but it would shatter the housing market here.
Easy credit has artificially inflated the housing market prices much more than foreigners buying real estate here (many of them are taking advantage of the easy credit as well).
The Federal Reserve Board in DC, as well as the Federal Reserve Bank of New York, have maintained outrageously low interest rates for 15 years. This is defacto printing money, and it's causing record homelessness in coastal cities as the extreme decline in housing prices.
Raise interest rates enough to feel it, and that would be end of high housing prices in NYC. Some people would lose their jobs and not be able to pay their mortgages or rents, but it would shatter the housing market here.
Easy credit has artificially inflated the housing market prices much more than foreigners buying real estate here (many of them are taking advantage of the easy credit as well).
What I'm going to say might be somewhat flawed in its factual assertion, as I heard this explanation a couple of decades ago perhaps . . .but, on the premise that what I am gong to say is factually correct, I'm sharing this here to serve as an ANALOGY to what you are saying:
I'm in my 60s now and I think (???) that I recall correctly that, at least in the 1960s (perhaps the first half of the 1960s, if not part of the second half of the 1960 as well), my mother used to open multiple bank accounts at multiple banks just to get the gifts that the banks gave for opening accounts with them. And, if I remember whollly correctly (which may or may not be the case), she used to get rather high interest rates for savings accounts (compared to what banks pay now) such as 8% or 10% (if not even higher at times???). Compare that to this day and age . . . whereby, for a good many deacdes now, banks pay so very very very little interest for accounts established with them (e.g., if you get even 1% or a fraction of 1% interest, you're lucky). And I'd wondered and asked why this was the case. Some seemingly informed person(s) (perhaps some bankers, perhaps also a lawyer or accountant, if I recall correctly) had said to me that it is attributable to the Federal government. That is, the banks themselves would want to pay more interest on accounts established with them so that they could compete better with one another to attract customers and yet said person(s) said to me some decades ago that the Federal government requires the banks to pay so very little in interest becaase they (the Federal government) want to keep the interest rates as low as can be so that they themselves can borrow money at very low rates (or something to that effect . . . if my recall of what I think I recall being told is factually correct).
IN SUMMARY: What I shared above, if it is even factually correct at all or even correct to some degree, seems analogous to what you are saying here. That is, you appear to be saying that New York City's (and perhaps the NYC CMSA at-large as well?) has stratospherically high housing prices because the Federal Reserve, as you put it, ". . . has maintained outrageously low interest rates for 15 years" . . . though 15 years ago was year 2002 and it seems that NYC (and the NYC CMSA at-large, for that matter) has had sky-high housing costs for well longer than 15 years. In any case, if what you say entails a true "cause-and-effect" relationship regarding the extremely high housing costs in the greater Downstate New York metro area, then your example and my example are BOTH analogous examples of the Federal government being the cause of two distubring long-standing trends: exorbitantly high housing costs (in NYC or even encompassng the NYC CMSA at-large as well) and then also exorbitantly low interest rates paid by banks (and that is a long-standing national trend, as we all know). What banks pay for interest on accounts held with them is an absurb, ridiculous joke . . . yet, in contrast, look at how much they charge for interest on loans or on credit card use.
If anyone reading my original statement about the primary cause of the extremely low interest rates paid by banks is truly more knowledgeable than I am on the matter and hence can correct what I said, please do so.
The Federal Reserve Board in DC, as well as the Federal Reserve Bank of New York, have maintained outrageously low interest rates for 15 years. This is defacto printing money, and it's causing record homelessness in coastal cities as the extreme decline in housing prices.
Raise interest rates enough to feel it, and that would be end of high housing prices in NYC. Some people would lose their jobs and not be able to pay their mortgages or rents, but it would shatter the housing market here.
Easy credit has artificially inflated the housing market prices much more than foreigners buying real estate here (many of them are taking advantage of the easy credit as well).
Complete ignorance, if what you wrote was remotely true you'd be seeing it throughout the US
No, the true cause of extreme real estate in NYC is in fact global sheltering of assets, much of it illicit. From African and Russian corrupt officials, to Colombian and Costa Rican drug lords and everyone in between, the ultra rich are parking their ill gotten gains in global real estate. The US government managed to get the Swiss authorities to crack down on secret bank accounts and the safety and anonymity there is GONE.
Complete ignorance, if what you wrote was remotely true you'd be seeing it throughout the US
No, the true cause of extreme real estate in NYC is in fact global sheltering of assets, much of it illicit. From African and Russian corrupt officials, to Colombian and Costa Rican drug lords and everyone in between, the ultra rich are parking their ill gotten gains in global real estate. The US government managed to get the Swiss authorities to crack down on secret bank accounts and the safety and anonymity there is GONE.
NYC Real Estate is the new Swiss Bank Account.
So try again
Not even. You could not have any of this new construction without extremely low interest rates and substantial tax credits given to developers. Raise interest rates and stop using taxpayer money to subsidize luxury housing construction in NY and the market collapses entirely. The high prices are entirely a government creation.
The real estate prices and new construction are even in places no wealthy foreigner is going to buy. Places like Jamaica, East New York, the Bronx, etc. End taxpayer subsidies and raise interest and the market as we know it in expensive coastal cities would almost immediately collapse. Which is why interest rates have been kept so low. People like Greenspan, Bernake, and Yellen know what they're doing, even if it's detritto working class people.
This is likely a minor factor in NYC, but that’s it. Those interest rates are set at a federal level, but you aren’t seeing anything close to NYC levels of appreciation on a national level except for the Bay Area. That by itself dispels this as THE real reason, though I can believe it to be a real reason among many.
This is likely a minor factor in NYC, but that’s it. Those interest rates are set at a federal level, but you aren’t seeing anything close to NYC levels of appreciation on a national level except for the Bay Area. That by itself dispels this as THE real reason, though I can believe it to be a real reason among many.
Interest rates of 8 or 10 percent would crash the coastal real estate market. So would the loss of tax incentives. The government is keeping this afloat.
Real estate prices grew dramatically each time the fed lowers interest rates in response to a national recession. This happened in the post 9/11 recession and this happened post /008 recession. Of course there are other factors like tax credits for developers, weakening on rent stabilization laws, etc. But it could not happen or maintain itself without low interest rates. If the fed were to raise interest rates substantially the market would crash.
historically real estates best appreciation has been when mortgages were in the 6% range .
rates don't move up in a vacuum . so if rates are in that range it means the economy is humming , people are working and spending and inflation is rising at a higher pace .
there is little connect between rates and real estate markets unless they go very high . real estate has and is always dominated by the local economy and market .
the fed does not control long term mortgage rates . investors do . in fact many times the fed has raised short term rates while bond investors don't see things that way and they actually bid bond rates and hence mortgage rates down . the fed hopes the bond markets follow their lead but that is not how it works .
you do realize the fed has been raising short term rates for almost a year while bond rates and mortgages have been falling since they started .
bond rates are set by investors based not on the feds short term rates but on how investors perceive inflation years out along with fear and greed . very little in short term rate moves factor in and it is only the short term rates the fed moves when they raise rates .
in 2006 the fed was raising rates and the bond market smelled trouble and bid rates down .we had the famous inverted yield curve where short term rates were higher than long term rates.
almost 40% of all real estate transactions recently have been all cash and involve no mortgages . markets are more localized than anything else .
in fact there can be 100 homes for sale and if your wife only likes one of them then it does not matter how many are for sale .
what counts most is the homes themselves on an individual basis .
interesting enough is over the last 40 years every time the fed raised short term rates 1% or more in a year the bond and mortgage markets went the other way and rates fell .
only 1 exception was 1996 .
the left side is how much the fed raised rates , the right side how much bonds appreciated and went in the opposite direction from what the fed wanted . 30 year mortgages track intermediate bonds fairly close so when bond rates fall mortgages fall .
Last edited by mathjak107; 09-27-2017 at 03:47 AM..
The rates that have been set for the past few years are now the norm. Just like 11% was the norm 15 years ago. They know if they raise it dramatically higher than the current norm, the real estate market will stall as well as refinancing.
Not even. You could not have any of this new construction without extremely low interest rates and substantial tax credits given to developers. Raise interest rates and stop using taxpayer money to subsidize luxury housing construction in NY and the market collapses entirely. The high prices are entirely a government creation.
The real estate prices and new construction are even in places no wealthy foreigner is going to buy. Places like Jamaica, East New York, the Bronx, etc. End taxpayer subsidies and raise interest and the market as we know it in expensive coastal cities would almost immediately collapse. Which is why interest rates have been kept so low. People like Greenspan, Bernake, and Yellen know what they're doing, even if it's detritto working class people.
You're really way off with this one. Very bad analysis and conclusion by you. As a writer you need better research skills. You have a very rudimentary understanding of economics and taxation. The Treasury Dept, NYS, NYC, RE industry, CPAs etc have been pointing out one of the main drivers of the overheated RE market here. I work at a Big 4 and used to be in tax doing cert for RE developers and sponsors and the problem was obvious. The government will not address the problem though because they tax revenue may decline.
And for you to even suggest raising rates to tame one sector of the economy without seriously considering the impact on others shows that you're crazy or ignorant. Do you know that banks are required by law to finance certain projects?
The Federal Reserve Board in DC, as well as the Federal Reserve Bank of New York, have maintained outrageously low interest rates for 15 years. This is defacto printing money, and it's causing record homelessness in coastal cities as the extreme decline in housing prices.
Raise interest rates enough to feel it, and that would be end of high housing prices in NYC. Some people would lose their jobs and not be able to pay their mortgages or rents, but it would shatter the housing market here.
Easy credit has artificially inflated the housing market prices much more than foreigners buying real estate here (many of them are taking advantage of the easy credit as well).
I agree 100%.
Easy money should be used by the Fed to rescue an economy in peril. Instead it is being used to inflate stock market prices and real estate valuations. The Fed was granted immense power in order to stimulate employment and curtail inflation and it is doing the precise opposite.
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