US Economy Rocks On - 10YR Nears 5%
A: U.S. Service sector expands at a faster than expected pace in May, removing any last hope of a fed rate cut; aww, all those fed rate cut people..I feel so bad! NOT! Folks, I've been saying for over a year now that rates need to go higher to curb inflation pressures and right now the markets are functioning properly to correct itself! As the latest report on US economic growth comes in better than expected, 10YR bond yields continue their upward trend and flirts with 5%! Expect lending rates to stay at already risen levels and even trickle higher as long as this trend in the bond market continues!
According to Yahoo Finance:
Surprising strength in the nation's service economy, coupled with recent data showing the manufacturing sector is humming along, suggest the broader economy may be shaking off slumps in the housing and automotive industries.The media is starting to get it and I would certainly expect big media to start reporting on the effect that higher lending rates is having on the national housing market.The Institute for Supply Management, based in Tempe, Ariz., said Tuesday its index of business activity in the non-manufacturing sector registered a faster-than-expected pace of 59.7 in May. The reading was higher than April's reading of 56 and Wall Street's expectation of 56.
While a rebounding economy is welcome news, investors worry that unchecked growth could prompt the Fed to hike interest rates, a move that could dampen spending.
Here in Manhattan, the effect of purchasing power as a result of more expensive money is still yet to seen. I still see a generally strong market here with healthy buyer demand and VERY little inventory to choose from! I don't expect the inventory trends to change much as we enter the hot summer months but do expect many overpriced listings to come down to earth as they realize savvy buyers aren't biting!
For all those serious buyers out there with a time pressure to move, be sure to re-assess your financial situation now that lending rates have risen to see how your buying power is effected.
Read my post, "Rates Going Higher - How To Adjust" and download the spreadsheet for help with this. As for your apartment searching, continue to be disciplined and be sure to ask your buyer broker for all data on what the building of interest is trading for so that you can evaluate the specific property in question to see if it's asking close to market value! Some fundamentals against buyers right now include:
While it is not a frenzy market like it was back in February & March, the scale is still biased towards a sellers market here in New York City, and you should definitely give yourself some time to find a good product if you already made the decision to buy and have a time pressure to close.
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