Ask The Experts | The Impact from the Rise of Interest Rates

Interest rates headlines are all the buzz nowadays. Yes, after years, and years, and years of us writing that interest rates have nowhere to go but up, it’s finally happening. Interest rates are on the rise. So we thought we’d answer the primary question we’re constantly being asked about this long-forgotten feeling of increasing interest rates.

Question: “Will the recent rise in interest rates have a big impact on mortgage rates?”

Answer: Rule number one as we talk about rates: interest rates are not mortgage rates. Jumbo mortgage rates react differently than conforming rates; Interest Only ARM rates react differently than 10-year fixed ones. Interest rates certainly influence mortgage rates, but if you’ve ever been rate obsessed and called your mortgage broker asking for a refi rate after seeing some clip on CNBC about the falling 10-year yield, you know that it’s not that simple.

In fact, many financing experts are saying that Fed increases are already “priced in” to mortgage rates – meaning no move, at all. Hah! Go figure. Here’s more from the “pros”:

The Federal Reserve sets the rate for the overnight exchange of money by banks; governors adjust the rate to help curb inflation or stimulate growth, depending on their assessment of what would be best for the economy.

Although this rate is not the same thing as the mortgage interest rate that buyers pay when they take out on a loan on a home, movement of the Fed rate up or down can put pressure on mortgage interest rates.

“With this increase well anticipated by most markets, Keller Williams does not expect any dramatic change in the current path of mortgage rates. Rates will likely continue to slowly rise this year barring a change in the economic situation,” said Ruben Gonzalez, staff economist, Keller Williams, in a statement.

“While higher mortgage rates will likely have some downward impact on demand, housing remains very affordable by historic standards and we anticipate another year of healthy home sales despite an environment of increasing mortgage rates,” added Gonzalez.

What we do believe is that mortgage rates will likely trend up.  We therefore anticipate another year of solid activity, despite an upward trend in rates. More aptly put, we believe that local housing dynamics in the city, and supply and demand considerations, will be far more impactful drivers of the NYC market than will rate movements.

At The Core | Data vs. Wisdom

Data and information are all around us. Big data, data analytics, now AI … information, especially with respect to real estate is more transparent than ever, with the likes of Streeteasy, Trulia and Curbed, and even more data-laden competitors coming online seemingly every month…it would make sense to assume, then, that such overflowing information would make buyers and sellers more savvy and wise about the market.  And yet this assumption would be flawed.  Repeat after us: data is only data. And more data does not necessarily equate into more wisdom; often the opposite is true. Without the context and experience to make it sing, it’s one piece of the puzzle at best and unconstructive noise at worst.  But boy is it addictive; and boy can it lead many down the wrong path.

Data does not equal strategy.  Data does not equal wisdom. 

Think about it this way:  the real estate market has become incredibly transparent over the last decade, with a growing number of sites and services all providing more information and data. If the premise that data = wisdom holds, then we should have seen a precipitous drop in broker-led transactions, along with an exponential spike in FSBOs and private transactions. But we haven’t. Why? Because having and owning the information is no longer the broker’s value add; it’s wisdom and its application to serve you. Even leveraging pricing algorithms or savvy market trends falls short of being able to know how and when to apply this information in a way that moves the deal forward.

It all gets down to People.

We can’t tell you how many people become attached to their numbers, the comps, and the research they perform. And the more research they do, the more attached they become (it makes sense, considering how much time was invested).  But this neglects the broader reality that:

  1. Real estate is still not hyper efficient.  Emotions and beliefs continue to play a significant role due to the personal nature of a home versus orange juice futures, as an example.
  2. Each property is unique in some capacity.  Whether the quality, exposure, or floor, no two properties are exactly alike. Which means that, technically, every property is unique; this is not a commodity product.
  3. The market is incredibly fluid.  One particularly positive economic outlook or one material stock market crash can impact mindsets, both on the buying and selling end – and things move fast, faster than ever, in fact.  Further, data points from a mere 6 months ago can already be stale and irrelevant. By the time the data is captured and analyzed, it’s often a lagging indicator of the market, not a leading one.

At the end of the day, the wonderful world of real estate goes ‘round based on one individual’s desire to sell matching one individual’s willingness to buy.  Our advice to our loyal readers: try to look at the bigger picture and the longer time horizon; make sure to balance a potential obsession with the dollars and cents with the 5+ year horizon ahead.  (We’ve seen buyers and sellers walk away from the table over a $10k difference price on a $2 million+ apartment more times than we can recall; that’s just silly.) All of this is to say that the data and numbers are important, but they are only one piece of the bigger picture. 

Monthly Gem | 121 E. 22nd Street

There are many neighborhoods we love throughout the city, each with their own flavor and attractions. Yet Gramercy has always had a sweet spot in our hearts. Our love only increases with our Monthly Gem: 121 E. 22nd Street. Few locations are more perfect than this, ideally situated at the intersection of Gramercy Park and Flatiron. Not only are there transportation hubs mere minutes away from the building, but you have Madison Square Park in its back-yard, the Union Square market in its front-yard, and Eataly right around the corner. The sheer concentration of restaurants, retail and activities rivals any other neighborhood.

The building itself is stunning, with 133 units all-in; large enough to be substantial but not so large as to be overwhelming. Notably, this is the first residential building in NYC to be designed by the world-renowned architectural firm OMA. And it shows. From its unique, three-dimensional glass façade, to its practical-luxury interiors, the building pays homage to the distinctive cross-roads where it’s situated. As you might expect, residents will be able to enjoy a cadre of amenities, from an indoor pool, residents’ lounge, fitness center, screening room and children’s playroom, among others. We can’t wait to see this gem evolve to completion as a new landmark in an already impressive neighborhood.

Date Your City | NYC Street Fair Guide

Come and get it! Step right up for your NYC Street Fair Guide!

It’s close to that time of year, folks, as the ice thaws and spring blossoms. It is time to shed your winter layers and prepare for the various street fairs NYC has to offer:

If you like the last two of the above, you must check out the more pop-up geared set of culinary experiences across all of NYC: http://www.popupnewyorkevents.com/#menu-section . At this rate, you can literally eat your way through the Spring and Summer, and use it as a perfect excuse to get out of the 10-block radius most of us call home 90% of the time … explore the city and bite into something new, an Italian treat or a Thai dumpling. Just remember to hit the gym so that you don’t become a dumpling, yourself.

Apple Bites | Ichimura & Pig Bleecker

Since we are passionate foodies, we are super excited to share our Apple Bites for this month.

The first is Ichimura, a 10-set sushi den on Leonard Street in Tribeca. At a sizeable cost of $300 per person, the highly exclusive amakase menu creates an experience that’s 2 hours long … 2 hours of delectable, mouth melting, sushi extravaganza. With yelp reviews boasting “you won’t find better in the US” and “the best night of my life”, it’s hard to not be at least intrigued. Ready to splurge?

On the opposite end of the culinary spectrum, we have a barbecue meats fine dining, with a heavy focus of smoked meats at Pig Bleecker in the Greenwich Village. This is the follow-up restaurant to Chef Matt Abdoo’s Brooklyn barbecue restaurant, Pig Beach. No fear: they also serve vegetable and fish dishes, so you can be sure that there’s something for everyone!