Posted by Leonard Steinberg on January 25th, 2012

Some good news for the real estate markets (and markets in general): To-day the Federal Reserve pushed back the likely timing of an eventual interest rate hike until late 2014, much later than it had previously said, as it nurses a still-sluggish economic recovery. In a historic step toward greater transparency, the Fed announced an official inflation target of 2 percent. Three of the 17 policymakers expect rates will need to rise this year and two others did not see any increase until 2016.

Low interest rates are historically good for the residential real estate market, and this indication for the future is healthy, although it certainly will remove any urgency a buyer may have had they believed a rates rise was imminent.  For new developments it is especially important, as a buyer committing to-day to buy in a new building that could only close in 2013 or 2014 has some measure of re-assurance that rates will not rise, or rise significantly at the time they are ready to close.

Now lets hope that 2% inflation target can be maintained: all indicators in Manhattan lead me to believe otherwise. Then again, the official inflation rate does not take into account the cost of housing, fuel or food (believe it or not!) even though rents and food costs rose close to 10% in 2011 in New York.