How Do Interest Rates Affect Real Estate Market?

Joshua Weisfeld is an asset manager at W Brothers Realty, LLC in New York. Though he studied communication and rhetorical studies in college, he had an early diversion into real estate. At W Brothers Realty, LLC, Josh Weisfeld is known for always putting clients’ goals and needs first. Joshua Weisfeld is passionate about real estate and has an expert understanding of the New York City real estate market and how interest rates affect real estate value.

According to finance and real estate experts, interest rates significantly impact the cost of real estate and its accruing income. It has been noted that the interest rates on interbank exchanges and treasury bills have the most significant impact on real estate. This is because interbank exchanges and treasury bills usually decrease and increase the cost of mortgage capital.

Similarly, the federal funds rate is another interest rate that might affect real estate pricing. The federal fund rate is fixed and is set by the United States Federal Reserve. Commercial banks adopt these interest rates when lending out money to each other. This invariably affects the mortgage rates.

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The Rise of Co-living Spaces in New York City

 Joshua “Josh” Weisfeld is a communications and rhetorical studies graduate from Syracuse University. He is an asset manager at W Brothers Realty, LLC in New York. As a commercial real estate professional, Joshua Weisfeld is interested in new trends in real estate, especially in the New York market.

One of the popular real estate trends in New York City is co-living spaces. They are popular for their reputation as cost-effective and community-oriented housing alternatives. They feature shared facilities like kitchens, workspaces, and lounges. They can also help people searching for social interaction, such as new city inhabitants, find what they seek.

According to the New York Times, more co-living companies have emerged in the city. The largest operator, Common, has over 20 locations throughout the boroughs. The NYC Department of Housing Preservation and Development reports that creating co-living spaces is encouraged as a part of its affordable housing initiative.

However, not all co-living spaces are affordable. While some locations might prioritize affordability and easy access, others might provide more opulent amenities like rooftop terraces and gyms.

The combination of affordability and community has made co-living spaces a popular housing option in New York City. As the city evolves, co-living spaces will likely remain ideal for many New York residents.

Apartments in the US Getting Smaller

 Joshua “Josh” Weisfeld is an accomplished real estate manager based in New York City. An asset manager with W Brothers Realty, LLC, Joshua Weisfeld develops and leases commercial assets including multifamily apartment complexes.

Apartment sizes in the United States are getting smaller. A report by RentCafe showed that, in 2022, the average size of new apartments was 887 square feet, a decrease of 30 square feet from the average size in 2021 of 857 square feet. This was the largest single year drop in a decade. One of the reasons for this big decline was an increase in the number of studios and one-bedroom apartments that entered the market in 2022, accounting for 57 percent of new units.

The average sizes of apartment types in 2022 also fell. The average size of studios fell to 464 square feet in 2022 from 477 square feet in 2021. The average size of a one-bedroom unit in 2022 was 727 square feet, down 12 square feet from 2021, and that of a two-bedroom unit was 1,097 square feet, also down 12 square feet from 2021.

Tallahassee, Florida, was the city with the largest average new apartment size in 2022 at 1,182 square feet, while Seattle, Washington, had the smallest new average apartment size at 659 square feet. Three New York City boroughs ranked among the top five cities for smallest new apartment units in the country. They were Queens with 681 square feet, Brooklyn with 692 square feet, and Manhattan with 740 square feet.

How Interest Rates Impact the Current NY Real Estate Market

 Residing in New York City, New York, Joshua Weisfeld earned a bachelor's degree from Syracuse University with a focus on communications and rhetorical studies. Joshua "Josh" Weisfeld then became the asset manager at W Brothers Realty, LLC, where he helps negotiate real estate transactions in the New York City area while putting his client's needs and goals at the forefront of every deal.

According to Norada, the striking increase in inflation and mortgage rates in New York has slowed sales and the amount of inventory on the market. Data shows that with the volatile economic market, buyers are waiting to buy a home as their financial situations may have changed, or they may be waiting for the real estate market to reset.

Closed sales in New York were down 23 percent (pulled in November 2022) from the previous year, and new listings have decreased by 9.2 percent. That could be why the median price of a home has gone up 2.7 percent.

However, as the interest rates on mortgages rise at any given time, the value of cash flow futures is diminished, thus lowering the value of real estate property. This causes investors to seek higher returns even though the property is the same. The relationship between rising interest rates and inflation in real estate is even more complex, so it helps to have a solid real estate agency on its team that can help buyers and sellers navigate the nuances of the current market.

Investing in US Real Estate for Foreign Investors 2022

Many foreigners like the idea of purchasing property to rent out in the United States. The idea revolves around the notion of United States being a transparent market, along with a full suite of real estate services and rental agents that manage finances. All of these aspects make the US real estate market very appealing to many foreign investors. However, there are a few factors that foreign investors must consider before they invest in US real estate 2022.

High Litigation Risk

Litigation risks are real when investing in the United States. People in this part of the country will not think twice before filing a case against you. This is why you need to make sure that you have plenty of insurance, and an asset protection strategy. Many people in the US use LLCs to hold their properties, and some even put each individual property in its own LLC or Limited Liability Company.  Generally, you would want to put an LLC in the state where you are investing in. This means that if you are investing in different states, it can make things complicated for you. Overall, you need to make sure that you are insured and protected so that you do not have to deal any litigation problem. Getting an attorney to structure things properly for you is often a helpful measure.

You Do need to file a Tax Return

There are myths in the market which tells foreign investors that they need to file a tax return. There are different forms for non-resident investors and thus, there may be a different tax treatment. However, this does not mean that foreign investors will be exempted from tax returns. Therefore, you need to make sure that you do not get in trouble with the IRS. In some countries, filing a tax return is optional and not very stringent. But in the US, the IRS is more dialed in when it comes to taxes. Therefore, people in the US are more apprehensive towards the IRS unlike other countries.  Foreign investors need to make sure that they are filing the tax return, and have a good tax preparer who is an expert at what you do.

Hurdles for Foreign Investor

As a foreign investor, there are a few hurdles and hoops that you will need to face as an investor that a US-based investor may not have to deal with when buying a property. This is why it is incredibly important for foreign investors to work with a team. Reaching out to a team will help you find properties and jump through all obstacles that can come with getting an LLC (Limited Liability Company).

Final Thoughts

Overall, foreign investors not only have to side with a business entity, but they also need to work with a great tax team as well.  Moreover, they need to be aware of all the litigation nuances that come with setting up a real estate portfolio in the United States. By taking all the above mentioned steps into consideration, foreign investors can build a successful career in US real estate.

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Is the Real Estate Market in a Bubble?

Home prices in the US are soaring at a record speed. The median home prices have seen a 23.4% spike from the last year. Many of the homes in the real estate market are selling for record prices, and people are paying upfront cash for the houses after getting into competitive bidding wars with other buyers in the market. This situation is unlike ever before and real estate investors are currently benefiting from these gains in the price.

 What Happened in the housing Market?

As the pandemic started, the government mandated social distancing laws, which caused businesses to shut down, which ultimately led to unemployment. To counter this economic backlash, the Federal Reserve decided to lower down interest rates, and this resulted in mortgage rates to crash.

As people began to buy homes due to the pandemic, the prices began to rise due to low inventory and not enough homes per sale. Today, housing prices continue to rise and many people fear a housing bubble that may be looking to pop. 

The fear of the housing bubble crash may even lead to one if the apprehension starts to spread. Buyers do not want to be the ones suffering the losses if a transition happens and the bubble does happen to burst. If the housing bubble burst, it means that a large number of people’s wealth will be tied in risky assets.

Is a Housing Bubble Imminent?

The occurrence of a housing bubble is due to a growing demand in real estate which causes the price to spike, along with an influx of speculation which pushes the price higher than it should, and ultimately, when the speculations cool down, there is an instant drop in prices.

It is very difficult to focus on a single piece of data or an indicator to tell whether you are in a housing bubble or not. One of the more legitimate signs to look for when trying to decipher whether the housing market is in a bubble would be the intangible factors.

For example, if you see people having growing speculative mindset towards the market and the type of investors entering the market are ones that are simply pouring money because they expect an astronomical gain, then this may lead to a housing bubble. Another telltale sign is credit being too easy.

If you do not keep tabs on the bubble signs, then there is chance that supply does continue to rise and creep up on the panic investors. Once supply starts to shorten the gap, and demand suddenly decreases, this leads to a sharp decline in housing prices and the bubble pops.

Concluding Thoughts

Housing bubble pops when people begin to develop a shift in their mindset. They start to realize that the situation is not sustainable. This leads to fear in the market, and people that had bought earlier begin to quickly sell to get maximum profits.

This leads to a chain reaction of mass selling where some also sell houses for a loss. According to the current supply index, and market behavior, it is highly unlikely that the market is in a bubble. However, it is important for investors to always keep tabs of the situation.

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Three Reasons Single-family Rentals will have Strong Demand in 2022 and Beyond

In the new stay-at-home culture eluded by the pandemic, housing demand remains high. The only red flag for the housing market is the supply challenges. Existing supply is at a record low, and the supply for builders is half of what it was a year ago. The builders did not expect an immediate recovery and demand just after the pandemic hit. Now, they are faced with a shortage of land and labor, along with a higher cost for material. This ultimately leads to an increase in home prices for consumers that are looking to buy any types of homes, including single family rentals. This may be bad news for the home buyers, but it is great news for the single family rental market, which is now experiencing a high increase in demand. One of the biggest players in this space saw a record leasing occupancy. Below are three reasons why there is a strong demand for single family rentals.

 People are realizing the Value Proposition

The strong demand for single family rentals is expected to continue in 2022 and beyond. This demand is not new, and has been there for several years. Covid has accelerated it, but it is less likely to change in the future. People are starting to realize the value proposition of single family rentals today more than they did before. Rentals are rising in demand in the US market as the real estate market recovers from the pandemic. Demand for rentals is soaring to new heights. In most major markets, occupancy rates are steady above 96%. This marks the highest levels recorded, but it is difficult to tell whether the momentum will hold.

Federal Assistance

 Federal assistance to low income renters that are struggling to pay the rising rents in the face of unemployment are also facing troubles in the market. Intentional policies that subsidize rents and ease affordability is also a reason why single family rentals are experiencing a high rise in demand. Therefore, the rise in demand for rentals may also stem from the fact that people are looking for federal protection after they make an investment.

Rental Market is Booming

The applicant pool for single family rentals are off the charts in today’s market. In July last year, rents rose 7% for one bedroom apartments. Single family home rent is also up four to five times higher than the annual average increase. The rental applications that landlords are receiving consist of people with higher credit scores, and applicants that are looking to put down heavy security deposits.All of this was not the case before Covid-19, and eviction crises and policies are playing into this rise. If you have renters who are not paying the rent and you cannot turn the property over, then this takes out of the supply that you need for all the renters coming in. You also have demographics coming in such as millennials are other people that are moving out of their parent’s homes. All of this is causing the rental market’s rise in demand.  Disclaimer: This is not financial Advice.

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