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The increasing prices of everything from real estate properties to everyday goods are an unfortunate sign of the times. The New York Federal Reserve reports that consumers will see inflation reaching up to 6.6% over the next year. This is the highest on record within the decade, and consumers are already seeing medical care, food, and gasoline prices increasing by 9.6%. College costs have also risen by 8.5%, while rental values had the sharpest increase at 10.2%.
As the nation keeps on combatting different financial emergencies, customers need to comprehend what the changing economy can mean for their regular routines, especially their housing. Now that prices are hiking up, here’s an in-depth look into how inflation can affect the real estate market:
New York City is ripe with career opportunities, which is why it sees such an influx of hopefuls. Since the city is home to big businesses and industry leaders, numerous individuals come to New York to score jobs and live the American dream. But while you may have lots of chances to land a job in NYC, it isn’t as easy to live in the city.
The cost of living in New York is much higher than average. Making it one of the most expensive places to live in the US. In fact, New York’s housing market is a good example of the steep costs within the city. Though there are many high-paying employment opportunities in Manhattan, the average rental cost is about $4,000 per month. This makes it three times more expensive than the national average of $1,463 monthly.
While Manhattan is definitely one of the pricier areas, even affordable areas like Borough Park and Midwood still charge rent at a whopping $1,625 for a typical one-bedroom apartment. Since two-thirds of New York’s population lives in rented housing. The average New Yorker needs set aside more than 30% of their income for housing costs.
Unfortunately, the cost of living will likely further increase in the Big Apple. Financial guides on AskMoney, particularly their recommendations for battling inflation. Explain how interest can fluctuate over time based on the supply and demand, inflation, and policies set by the U.S. Federal Reserve. Interest rates are the primary factor that the Federal Reserve uses in mitigating inflation. So one’s growth can easily lead to the other’s increase.
Once the Fed raises its inflation rates, it then increases the amount of borrowing that banks must do to be able to lend money or meet regulatory requirements. Understandably, banks push these rising costs onto consumers and businesses that need loans like mortgages. Which can only mean one thing in terms of housing prices: an upward trajectory.
Mortgage rates have been quickly climbing during the beyond couple of months. And it’s all because of the spike in inflation rates. Buffalo News states that the Federal Reserve has begun to worry about inflation. Which is why they’re increasing interest by a quarter-point in mid-March. Fed watchers believe that there’ll be six additional rate hikes in the coming months. Making it the highest increase in as much as fifteen years.
The rising inflation rate and its effect on interest rates have already taken a toll on the buying power of consumers. Syracuse.com points out that rising mortgage rates are already affecting prospective home buyers along the price spectrum.
To illustrate, aspiring homeowners who can afford to pay $1,100 a month in principal and interest will lose as much as $25,500 in buying power if the interest rate jumps from 4% to 5%. Meanwhile, the people who can bear to pay $6,000 a month in head and interest will lose $139,100 in purchasing power in view of the expanded interest rate. These big decreases in the consumers’ buying power can result to significant changes in one’s real estate purchases.
Given the high rates of mortgages and other products, the future of the housing market can sound worrying. But while mortgage prices and inflation rates continue to increase this year. Financial experts are optimistic that the surge of US housing prices will soon go back to the average price range.
Fannie Mae’s housing forecast of market prices over the next few years indicates the cooldown has already started, since home-price inflation is expected to wane around the middle of 2022. It’s estimated that home inflation rates will continue to decrease in the next few months until they return to the pre-pandemic rates in 2023.
While it may be a waiting game, Fannie Mae estimates that the rates for 30-year mortgages will reach an interest rate of 3.5% by the end of 2023. Which is a big difference compared to the 5% interest rate in late 2018. As such, aspiring homeowners just need to be patient. As they could soon get their hands on a great property for a reasonable price.
Inflation is driving a rapid rise in the prices of real estate and the interest rates of mortgages. But expert economists estimate that housing prices may soon decrease and be more favorable for consumers. So if you’re interested in renting, buying, or selling a property, Rent Own Sell New York is here to help. Take a look at our sales guides so that you can soon score the best deals for your next property in New York.