At some point, mortgage

rates must go back up, but I’ve just about given up trying to guess when that will happen.

I can remember conversations back in 2009 and 2010, the substance of which was that hard assets will be a smart play.

As inflation comes in, real estate, among the long list of hard assets, will appreciate.
But what happened?

Inflation didn’t come in to save the economy.

Instead, cheap money just provided leverage to inflate assets.

Since this cheap money has not been available for everyone, we’ve seen art and high end real estate outpacing much of the other asset classes.

The stock market, ever unpredictable, has unleashed a fury of borrowing the likes of which we may never see.

But all of this asset inflation hasn’t exactly reached the entire economy, or the entire populace.
The borrowed money hasn’t gone into business investment the way the Fed expected.

In short, it’s a surprising time.

So – what happens when rates finally go up? Will they ever go up?

We’ve been waiting quite a while.

I feel like a tree in the forest (see the video above).

We’re captured on a carousel of time.

Harry Chapin?

Joni Mitchell?
Will there be more portfolio lending when rates go up?

Will prices drop?

Will the economy kick into gear as the Fed raises rates?

Will government economists admit that inflation is happening?

There’s no question that the cost of many things in New York (school, food, rent) have gone up – but how inflation is defined seems somehow to

bypass the things that cost more money!

Pretty annoying.
And so … in the few weeks since I wrote my last big-picture blog post, China has continued its stock market implosion.

Many sellers ask me if this will impact our market.

My sense is that the smart money has already left China, and the US just looks safer and safer, despite all the issues.

China will get worse – their economy will be revealed (as it has been

for a long time by smart people) as that rotten Rocking-Horse in that story we all read by D.H. Lawrence.
More questions: Will there be a glut of large condominiums on the market, with too few buyers?

Will Brooklyn ever cool off?

Will the oversupply of rental apartments coming online in Brooklyn pose a problem?
Jonathan Miller does a nice job of explaining why tight credit creates a higher percentage of renters

– those who can’t qualify to purchase homes due to overstrict underwriting.
What if underwriting gets easier as rates go up and fewer people rent?

Will these rental buildings in Brooklyn just convert to condominium?

That seems like the obvious YES.

But that doesn’t happen overnight, either.
I’m left with many, many more questions than answers this month.

While I continue to see strength in the market, I am so curious to see how a rising rate environment

(finally) will impact the housing market.

incredibly touching prayer service at the 9/11 memorial

The Pope blesses someone in Madison Square Garden, and a butterfly flaps his wings in Singapore.

Or inflation takes hold in the US.

That’s chaos theory, right?
As I write this, absorption rates have dropped yet again.

Prices have held steady or have gone up.

Inventory is still at historic lows.
Will demand keep soaring through this Fall season?

We’ll see 3rd quarter numbers in a week or so, which will prompt some more thinking.

Perhaps we can distill these thoughts into something beyond questions.
My sense is that this is a moment when the policies in place to help a struggling middle class are achieving the opposite of their aim, and as a real estate professional, I get a front-row seat to how the policies play out with housing.
As we near 2016, and politics start getting noisier, I

can only guess that we’ll get to see some storylines emerge.

Whether they hold true or not is a different matter.
For now, we continue to keep a close eye on the high end of the market.