Like any market, real; estate prices rise and fall in reaction to any number of economic and political factors. The combination of these factors is what is meant by the term "market psychology". When the net effect of the factors is positive, prices rise. When the net effect is negative, prices fall.
Licensed Real Estate Associate Broker
450 7th Avenue Suite 1501
New York, NY 10123
Inflation actually can have a negative effect on prices. If inflation rises too rapidly, as it did in the 70s, one of the few ways to counter that inflation is to raise interest rates. If interest rates go up to high, too fast, the market may react by having to reduce prices. If interest rates and prices are high, it is more difficult for buyers to be able to afford housing, thus depressing the prices.
As both Eric and Tom mentioned, Markets always have ups and downs. The mistake people made in the early 2000s was that they assumed prices would go up perpetually. This was a ridiculous assumption, because there are always perturbations in the markets caused by external forces. If the European Union were to collapse tomorrow, this would have a terrible effect on the global markets, possibly causing another recession in this country. At that point it would be likely that prices would take a hit again in Manhattan because of less European demand, as well as, diminished European imports meaning less money flowing into the US. This is just one grand scenario that would shake up the real estate market domestically.
I hope this has helped,
If you have any other questions or wish to discuss this further please do not hesitate to contact me.
All the best,
WEICHERT, REALTORS - House & Home
(718) 432-5000 (Office)
(917) 974-2600 (Cell)
609 Kappock Street Suite 1A Bronx, NY 10463
Even though the market trend will eventually end and prices will go down, I still believe that Manhattan real estate is still a great investment, especially in certain areas. If you're considering buying in Manhattan I'd love to work with you finding the right condo/co-op. Feel free to call/email me anytime.
Phone: 631 662 5579
Something that has kept Manhattan prices from dropping like LA did is the fact that most sales here are co ops. They typically require a much higher down payment than people are used to in LA. It is not unusual to have to pay 50% down and be able to show huge reserves so the board knows you can pay maintenance and mortgage payments.
All I can say is run from the RE agent who tells you prices can't fall. They can, inflation or not!