Column: Will a further interest rate hike this week affect home prices?


Jerome Powell, our Fed chair will be raising the Fed rate a ¼ of a point to 2.50 on Wednesday, Dec. 19, which will have been the fourth increase in 2018.

This is the overnight short term rate that banks charge each other for borrowing money amongst themselves. However, it just may have an effect on long term rates, as well as other rates on lending instruments. However, due to the still historic low housing inventory in most major markets, and still strong buyer demand for homes, condos and co-ops the market will continue to be very active, only if you price your property where the market is! However, the softening has occurred much more on the higher end of the market than the lower end, due to interest rate hikes and the unfortunate $10,000 maximum S.A.L.T. deduction (State and local allowable tax deductions).

If you are looking to purchase on the higher end and can do so, especially those looking to move up in this market, this winter and early spring might be an ideal time to be seriously searching and putting offers in, homes are taking longer at the top of the market.

In fact, the lower priced homes have seen greater traffic and are being snatched up very quickly, since many purchasers have revised their expectations and requirements and have been buying down in the market.

This increased demand especially in the 34 towns (from Old Westbury to Floral Park on the south side and most towns in between and Greenvale and towns to Great Neck on the north side, where this publication is read) has further reduced the number of homes to 86 up to $800,000 that are 3-4 bedrooms 2-2.5 baths as of 12/17/18 on the Multiple Listing of Long Island, not including exclusives.

The number of homeowner associations, condos and co-ops within those same towns has also been reduced to 144 that are 1-3BR & 1-2.5 baths up to $1 million as of the same date! (even adding in office exclusives, it’s still historically a tight market).

Even the rental market is tight, still due to the demand and the tight inventory at this time of the year. What I see happening are those that are being priced out of the market for what they can afford or want, have the following about six choices: staying put where they are and saving more money, buying a lower-priced home, possibly a fixer-upper, buying an homeowner association, condo and co-ops, renting or moving out of the area or relocating out of state.

I also see parents and relatives either chipping in or buying for cash, since many millennials and others are still not able to purchase with the escalation in prices over the last seven years (2011 was the bottom) or don’t have enough down payment.

I would say to all parents if you have it, and your children are working hard and you love them and deserve it; give them a tax free gift as much as you can within IRS rules and regulations; but always rely on your CPA and/or certified financial planner for professional and expert advice to guide you in this matter; and if you need a referral call me. Remember we are not taking anything with us when we go to the pearly gates except our good and bad memories, so why not add to your good memories and enjoyment, while your here, by helping out, that’s what we are here for, right? (I would be curious to know your thoughts on this matter?)
Most importantly, I do not see prices crashing or coming down on the lower end due to the interest rate increases; in fact, because of the increasing demand on the lower end, I see housing prices increasing by at least 2-3% or more and holding fairly steady.

However, one never knows what curve ball will come along in our world that could further have an effect on the housing market; Just observe the correction that has occurred in our stock market, of late. There surely is no bubble, since housing inventory is still very, very low and as I have said, strong demand from cash buyers, as well as all the qualified families and individuals, who are still searching for that, “place to call home.”
Many of us can still remember in 1981, when housing prices were really, really low and interest rates were really, really high, (Oct 1981 18.45 percent), due to our run-away inflation.

The key factor buying then was those who did buy paid such low prices (based on today’s’ prices); however, those that did and could afford to hold out with those excessive interest rates, refinanced later at much, much lower rates.

Rates came down over the years by half and then came down further the last 10 years. (in Nov 2012 30 year fixed rate mortgages were 3.35 percent and 15 year fixed were 2.66 percent).

Don’t we all wish that we could have grabbed those rates? Those who bought did; but looking at rates now they are still historically low and hopefully will stay close to where they are.

If somehow, Inflation raises its ugly head then rates would go up. However, with unemployment very, very low (lowest since 1969), oil and gas prices lowered over the last few months, I doubt it for the foreseeable future!

Remember, snow is coming and take a look at your heating bills too!

Sellers don’t you think it’s time to cash out and let more purchasers grab their American Dream?
I would like to extend my wishes to all my readers a relaxing, enjoyable (maybe a little crazy) holiday season and a more healthy, happy and prosperous New Year in 2019

Philp A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 Great Neck. He has earned designations as a Graduate of the Realtor Institute and a Certified International Property Specialist. Receive regular “free” updates of sold homes in your area and a “free” Comparative Market Analysis” of what your home would sell for in today’s market or search on: WWW.Li-RealEstate.Com He can be reached by email, at: Phil@TurnKeyRealEstate.Com, or by cell: (516) 647-4289.


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