Prices are up and supply down – but activity is remaining elevated
Traditionally one of the hottest – and priciest – housing markets in the US, New York has shown little sign of a protracted slowdown in 2024 despite prolonged high mortgage rates.
The state saw prices continue to rise in April on a year-over-year basis, jumping 3.8% from 12 months prior, with the number of homes sold only dipping marginally (by 1.1%) during that period, according to Redfin.
Indeed, even with the median sales price sitting at a lofty $830,000 in April, a clear majority of buyers appear unperturbed. Sixty-nine percent (69%) of buyers already located in New York searched to stay within the New York metropolitan area, according to Redfin, with 31% looking to move out of the city.
Brian Scott Cohen (pictured top), a senior loan officer with Guaranteed Rate Affinity in the city, told Mortgage Professional America that the New York mortgage market was continuing to advance at a decent clip despite a well-documented supply shortage and high borrowing costs.
A noteworthy trend of recent times, he said, has been the prevalence of all-cash offers, a strategy that’s showing little sign of fading.
“Real estate’s moving. Across all price points, we’re seeing movement, but not a lot of inventory,” he said. “And prices have not come down, so [there are] affordability issues.”
First-time buyers aren’t being dissuaded from taking the plunge into the New York market. “We’re seeing them buy all over,” Cohen said. “In Manhattan, there’s a lot of co-ops, where you kind of get more for your money. We’re seeing some low-priced co-op transactions right now and a lot of activity in the outer boroughs.”
Recent sluggish figures on the mortgage application front have been driven by the affordability crunch caused by high rates, as well as the much-publicized “lock-in effect", according to MBA chief economist Joel Kan.https://t.co/mzQQpVTeNi
— Mortgage Professional America Magazine (@MPAMagazineUS) June 10, 2024
Some of that buyer cohort are relying on gifted amounts from parents or other family members to help fund their purchase, although first-time buyers are largely a “mix” including people who are able to put their own money forward for the downpayment, Cohen said.
Are prospective homebuyers watching the Fed’s plans closely?
Expectations of an imminent rate cut by the Federal Reserve have started to fade recently, with labor market data suggesting the economy is still hotter than the central bank would prefer and inflation lingering above its target.
Unsurprisingly, many buyers are holding a keen interest in the Fed’s approach as they weigh up whether to step into the market or stay on the sidelines a while longer, according to Cohen.
“I think clients are keeping an eye on rates every single day. Everyone wants the lowest rate,” he said. “And when they hear in the news that it ticks up or down, everyone reacts. So I think that they’re very conscious of what’s going on with interest rates.”
While a summer rate cut now appears unlikely, the Fed is still widely expected to lower its key rate at least once in 2024, a development that Cohen believes prove a positive one for the housing market.
Like in other parts of the country, the so-called “lock-in” effect – which is seeing homeowners remain in place because of the low interest rate they secured during the COVID-19 pandemic – has been prominent in New York, but could become less relevant when rates finally start to tick lower.
“[For] clients that have 2% and 3% interest rates, I think eventually as rates start to come down, you’re going to see more people list and move to where they want versus being stuck holding onto their low rate,” he said.
How many people are moving into NYC from other metros?
Redfin’s analysis also showed only a tiny sliver of homebuyers in New York City are moving there from outside metros, with that figure rooted at 3%.
That’s a trend that Cohen has also noticed. “A lot [of buyers] are locals,” he said. “A lot are buying primary properties. We see some that are students or family, buying student housing for kids instead of paying dorm rooms.
“We’re seeing parents buy some second homes, but most people are living in New York right now and locals that are financing. There can be tons of people that are buying [in] cash that are not locals – but the people that are [securing] financing are locals.”
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