Americans continue their wariness as inflation suffocates the US economy. But bringing hope for clear skies and easy living while summer sits right around the corner, as of May 4th, the Federal Reserve (FED) recently announced an increase on interest rates.
But, What Does That Mean?
Well, the idea is that rising interest rates cause borrowing costs to increase. As a result, this slows the demand for goods, which causes inflation to decrease. And while decreasing inflation is, for the most part, a good thing, it is complicated to tell if rising interest rates are as well.
Rising interest rates have a bit of a domino effect: they can lead to overpriced housing markets. It’s also worth mentioning that New York City’s housing market is currently in the midst of its well known Busy Season. Now, with rising interest rates, the market can only soar so high before it hits turbulence, as properties will eventually reach unappealing prices. It’s all a matter of moving fast knowing how to fight infectious trends: with right pricing, every property can be sold with no stress.
What About the Stock Market?
This scenario isn’t great for the stock market. Even before the announcement on the 4th, sellers were panic selling out of fear of inflation. Now, after the announcement, it seems the sell off is continuing. The DOW and the S&P have already begun their downturn and with rising interest rates heading our way things might be looking like they will settle in a slow paced market.
As borrowing becomes more expensive due to the rising rates, demand for assets such as stocks fall because of how pricey the market is. Simply put, consumers stop buying until prices drop to a level that they feel comfortable buying again. If history is any indication of the coming months, it’s looking like the market will be in for a bit of a ride. When this happens, most equities tend to fall in price. People rush to the market and sell for mainly two reasons: to sell before their gains completely disappear or to sell because they don’t have the time to hold their positions and wait for the economy to return to what it once was.
What Is the Right Move?
Even though — and for the most part — it is smart to hold your assets, the NYC Real Estate market does not function on a “most part” basis, and as it is usual since the pandemic, it also does not function as expected. Manhattan has seen a supply increase of over 10 percent in just one month, and the volume on deals, although lower than last year’s, maintains a supreme high in comparison to what is common for pre-pandemic summer seasons.
Nobody really knows how long a recession might last and nobody knows how long it might take to recover from it. So it is time for buyers and sellers to keep an eye out for what the future could bring and, even more, make the riskiest moves before having to accommodate with what it is available.
