Math question...

What do you mean by “worth”? I’m not trying to be difficult, but answers to your question can vary greatly depending on what you are asking.

Further to inonada's point, we need a lot more information - specifically what has happened to rent for similar apartment in the intervening years among other factors.

I'll PM you

There is a deceptively "easy" way to think of the math on the worth of an asset based on interest rates, but nowhere outside of the strange world of residential real estate where folks often back into an "affordability" levels based on monthly carry costs would this idea raise its head. To be sure, the corporate world tests affordability of asset purchases based on the cost of acquisition, but that is just an input into the expected return and the cost of debt vs equity. The world survived when there were double digit mortgage rates in the 1970s/1980s, and high single government bond rates. I would expect/hope that any purchaser does not plan on paying out a mortgage for 30 years at current rates unless that turns out to be a better use of capital; they will either move or refinance.

One could think of the simple math like so. A $1MM apartment @20% down and 3.5% mortgage would yield a +/- $4,000/mo mortgage. The same $4k pmt @ 20% down and 6.5% mortgage would buy something sub $800k. That, in my view, is bad math. The price of a new car does not fluctuate with the lease payment, but may dampen sale activity.

thank you for the analysis, sport

Ali,

Sport is generally correct that there is less impact of higher interest rates than pure affordability analysis based on the mortgage rates would do. A couple of obvious reasons.

1. Incomes and hence $ affordability tends to go up with interest rates assuming inflation is the driver of increased rates. I will leave real interest rates and pre-payment benefit out of the discussion as it will become too complex even though I posted a model on one the posts to enterain NADA.

2. Supply and demand forces are far bigger driver. Otherwise, national home prices wouldn't be up 30 percent or so in the last 4 years while the mortgage rates are up more than 2.5%.

3. Somewhat related is buy vs rent analsysis which factors in current rents which in NYC are up significantly and lets you add future expectation of rent and price increases. That is probably the best tool available to individual buyers. There are several online versions. There used to be one at NYT which was pretty good. I am sure it is still there.

Of course for commercial, one could think of cap rates but individual home owners prefer that buy vs rent analysis.

@nycsport - If you are ready to downsize to our neighborhood, come check out our place and please value it at Mr. MCR's bottom line, which is current ask. We are taking a bath at current ask and have four (4!) nieces who want to live there at maintenance cost as a rental. Only one of them can afford it, and I just want the apartment gone for my mental health.Our agent has no doubt the apartment will trade in the next sixty days. Her track record is impressive, but I have no expertise in Manhattan real estate and know that generally what I value and put money into does not align with broader preferences. Further to that point, there are no overhead lights in the apartment by choice.

50% of before