2016 Nov 28th

Mortgage Rates Rising – What’s it Mean for Hoboken Real Estate?

CNN Money says mortgage rates are “surging” since the election.   The NY Times says rates climbed to a 16 month high, illustrating that the difference in a $400,000 mortgage would be an additional $700 a year in mortgage payment.  Higher rates make buying a home more expensive.  Perhaps with the limited inventory in Hoboken, it won’t matter.  Prices will stay strong because of the demand pressure.  If rates continue to rise, however, or if the economy softens, or if people start feeling nervous about the future, that could change.

When my clients ask for my view, my answer is invariably that they should be making a decision to buy a home based on much bigger factors such as the need for a tax write-off, the desire for more space or a better location or the potential for long-term appreciation.  Given the unpredictable events of recent days, however, the next four years for real estate may be a rocky road.  Like much else, we will have to see how it plays out.

  1. Randy

    My uneducated math:

    $700 a year extra in mortgage interest is equivalent to an additional $12,500 lent in a mortgage at the original rate (assuming the 3.8% at a 30 year rate).

    This would mean a $412,500 mortgage 16 months ago has the same yearly expenses as a $400,000 mortgage now. Without taking any other economic factors into consideration, this would mean 3% decrease in value of a home.

    Obviously raising interest rates and potential tax law changes will have several other affects as well.

  2. jc

    Good, let the market rest or even drift down for the a few years. We saw what happened after the boom years ending in 2007. I understand less supply, cash paying buyers, etc. argument…but nothing goes straight up. The publicly traded REIT Index ETF (VNQ) is down 13% since July. 4.25% is still relatively very low on a historical basis. In 2008 my jumbo mortgage was 6.75%. If I woke up today after a 8 year sleep and was offered 4.25% I’d freak out.

  3. lori

    Two points are very interesting to me and will play into where our market is headed. So much of the new construction in Hoboken is rental property. Will Hoboken continue to be the ‘stopping over’ point for new grads working in the City for a few years before they can save enough for a down payment on a condo or house in the burbs? Hoboken property taxes are so high and while the schools may have improved some, there is still much room for improvement. For years I’ve seen a continuous churn as the families with kids flee town. If that continues, how will it affect the market?

  4. jc

    So more rentals being built will keep the supply of available condos/brownstones down, which should be a tail wind for housing prices. They will need a tail wind since mortgage rates are up and chatter about limiting the mortgage interest deduction has renewed. Lori…your point about a churn is understood however dont you agree you’ve seen more strollers in this city then EVER?! So, I think its fair to say more young parents are staying in the city than ever before while you still see the normal “churn”. Then occasionally the young families that are priced out of (or just dont want to live) in Manhattan or Brooklyn anymore are movin here. The demand for the 3 BR’s dictate the story line. I’m no expert but arent taxes in the NJ burbs just as bad as hoboken anyway? I guess they have better schools so it is justified.

  5. Craig

    @Lori – Some perspective is in order. If you think the taxes in Hoboken are bad, compare it to Bergen or Essex counties. The annual taxes on my house in Bergen (which is assessed close to the same as my Hoboken condo was) are double what I was paying in Hoboken last year. You Hudson county dwellers have no idea how good you have it when it comes to property taxes. That said, there will always be more than enough people desiring to live in Hoboken to maintain its strong market.

    @JC – You see a lot of strollers in Hoboken because people are having their first kid there and hanging around awhile, just as we did. But once those kids are out of that stroller and reach school age and most of those families are goners. Why? Because the schools in Hoboken are still not so great. And bigger kids require a lot more space than infants and toddlers – that $1.5 million 3 bedroom in Hoboken is a hard sell when you can get a big house with a yard and better schools for half that just a few more miles away. Hoboken only has a bit over 32% home ownership rate compared to 67% for all of NJ. So make no mistake, it’s mostly a transient community of renters. Most residents don’t buy and don’t set down roots there for the aforementioned reasons.

  6. JC

    No doubt schools are a large issue, and agree on the transient community…but my point is relatively speaking I think families with young kids and toddlers are at a minimum staying longer than ever. I have no statistics to back this up (3BR sales maybe a hint) except my conversations with folks who have lived here all their lives and my own observations. I also think folks who have money are not afraid to spend on private schools and live here.

  7. AC

    There are definitely more families staying long term. My child is 4.5 and most of the families we met in the early years are still here and planning to stay. Many have bought brownstones in town or larger apartments in town. I think most people think the public schools are fine for elementary. There are also 3 charters. They are hard to get into but most families we know with kids in he charters are very happy. There are also several very good private school which are half the price of comparable Manhattan private schools. If you want to send your child to a good private school Hoboken is a great place to do it and many if the schools feed into the very elite NYC private schools for high school. We are debabting whether or not to stay in Hoboken or move back to the city and one of things keeping us here for now is the terrific private school we send our child to. I have no interest in moving to the suburbs and paying sky high taxes for a long commute and a generic suburban public school education.

    On another note, I would argue that kids don’t really need as much space as we might think. It’s so much better for the environment to live in a smaller space in an urban environment. I also think it’s better for kids to walk to the playground and interact with neighborhood kids as opposed to staying at home or playing in their own backyard. It’s such a gift to be able to walk to school, walk to the store, walk to the park, etc. it really gives kids a sense of ownership of their environment.

  8. Rod Handler

    We have a 7 year old girl and 5 year old boy. We are staying put in our 2BR Hoboken condo. Right now the kids share a room and when they’re older our son can move into the living room as his “room” for a few years until she leaves for college.

    Our property taxes are about $6,000. We have co-workers in Long Island and the suburbs of New Jersey. Sure, they have more room but they also have huge property taxes, like $15,000 huge. They also have to own a car, which probably costs $7,000 per year over the life of the vehicle when you add in purchase price, insurance, gas, and maintenance/repairs.

    So I figure we’re saving about $15,000 per year over our suburbs-dwelling co workers. And we use that $15k to pay for private school for our kids. We take them in on the path in the morning and pick them up on the way home. And judging by the kids on the path between 7-8AM we’re not the only ones doing this.

  9. Chili

    Wait – you’re saying that you’re going to have two teenagers living with you in a 2 bedroom apartment? One sleeping in the living room? Good luck with that! Sounds like crazy talk to me.

  10. Manny

    Everybody in living la vida loca…. Like RM<<<< Crazy!!

  11. lori

    Who or what is RM?

  12. jc

    I know…but ashamed to say.

  13. lori

    Y’all are gonna keep me in suspense?

  14. JC

    Manny is referencing the song “living la vida loca” by RM (Ricky Martin).

  15. lori


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