The Mortgage Uptick Just Killed The NYC Housing Recovery

newyorkskyline tbi

I live on Bedford and South First in Williamsburg.  There is a building around the corner selling for $550,000, do I buy it?

No brainer right?  Well, first check property shark and try to find one block that doesn’t have a brown field.  Then watch this little documentary: Toxic Williamsburg .  Sub prime also refers to less than desirable places to live and many of those sub prime areas are near on in industrial zones.

But that’s another article.  I’m a pretty savy realestate guy, the South Side of Williamsburg is on high ground and there were no old gas stations on the block of the building for sale.  Still, I’ll need a mortgage and my fiancee, who works as a CDO analyst at a ratings agency is pretty bearish on the state of the financial markets and the stability of her job. But heck, $550k!  We’ve got more than 20% to put down, she’s got perfect credit, is a first time home buyer, I’ve got a truck, build cabins in the Catskills and will do all the renovations myself.  Plus, it’s a 2 family!  We’ll get at least $1,000 a month for the first floor even if we have to cram in 5 starving hipsters during a full blown depression.

It all looked perfect on paper what with the 4.5% interest rates… but, that was about a month ago when we put in the offer, before we got the engineer in there and the bank inspector during which time the rates have gone up about a point and the price to heat the place has pretty much doubled. 

As of today, we’ve had to renegotiate a lower offer because the engineer found termite damage and because the higher interest rates put the monthly payments above what we feel is the minimum we can get to rent the building in the worst case scenario of my fiancee losing her job and our having to move upstate to be near where I work.  If the sellers don’t accept a lower offer then we won’t buy.

If we don’t buy the building we stay in our 2 bedroom rent stabilised apartment and wait for the condo market to drop even further. Toll Brothers is selling 2 bedrooms starting at a little under $700,000.  But at that price we could get something somewhere in Manhattan, a river away from the oil spill.  The smaller condo buildings have some of their ground floor and basement duplex 2 bedrooms selling in the mid $500’s, but there you run the risk of finding out that 10 years from now the ground water has spread the huge underground oil spill in the north farther south and that benzine is leaking in.  Also, most of the smaller buildings are unoccupied and we could end up being the only ones owning a share of a soon to be bankrupt coop.

There was a 2 week window of opportunity to make an intelligent buy in New York City with low interest rates and low housing prices.  If we missed it then most everyone missed it and we’ll wait till next spring.  I’m pretty sure that the raising rates killed any chance for a housing recovery for at least a year

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