How Will Rising Interest Rates Affect NYC Home Prices?

A question on the minds of many would be buyers these days is how will rising interest rates affect NYC home prices. 

It’s tough to make any solid predictions, given the unique circumstances of the housing market, especially in NYC. But here’s a round up of information to help you understand what might be in store for us.

Market Cooldown Ahead

There’s general consensus that rising rates are likely to cool the market and price increases. But it’s unclear to what extent or if it will eventually lead to price decreases. 

Sales have already started to slow down. But prices have yet to stop increasing as evident in the most recent quarterly report for Q2 2022 and national sales reports

Some think that prices will continue to increase, and only moderate their growth. While others think we’re going to see some price corrections across the country. Mark Zandi of Moody’s Analytics is a proponent of the latter belief while Danielle Hale of Realtor.com is a proponent of the former.

It’s worth noting that interest rate increases don’t always correlate with home price decreases. Check out this article from the Urban Institute to see the historical trends. 

Moderating Impact of Inventory 

One thing continuing to prop up prices is the lack of inventory. Although there have been some notable gains recently, there’s still a pretty significant under supply. And this is likely to remain the case since new housing construction is still low compared to historical trends due to rising costs, waning demand and supply chain issues. Additionally, not having enough options to “trade up” will likely keep many would-be sellers from putting their homes on the market. 

Predictions for NYC

But what about NYC, in particular? How are rising interest rates expected to affect NYC home prices?

We generally have a different market dynamic from the rest of the country. But in this instance, what’s happening in the market nationally may also play out here. Especially in Brooklyn which is shorter on supply versus demand than Manhattan is. 

If you’re looking in “bread and butter” segments of the market (i.e. 2 bed/2 bath or 3 bed/2 bath), don’t get your hopes up too much. Many buyers in these segments simply aren’t as sensitive to interest rate increases. Many of them can already afford large down payments or to pay cash outright. This isn’t to say there won’t be any impact at all. You’re just more likely to face less competition than enjoy notably lower prices. 

But if you’re looking for a studio or a 1 bedroom, you might have more opportunities. Those segments have a healthy supply. And that healthy supply might eventually translate to an “over supply” given that buyers in this market segment are more susceptible to interest rate increases. So keep your eyes peeled! 

How to Tackle Rising Interest Rates

If you’re thinking of buying your first home, but are concerned about managing rising interest rates, I’ve got you covered!

I recently did an Instagram Live session with a mortgage professional where we discussed the best ways to handle increasing interest rates.

You can get a replay link that you can watch anytime by signing up for my monthly email newsletter.
Click here to get on the list and get the link!

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