Are anxiety and uncertainty creeping into our marketplace this quarter with the current macroeconomic and geopolitical concerns? With rapid inflation, dizzying Wall Street and cryptocurrency swings, and wealth slip sliding away, do buyers feel poorer suddenly? As further headwinds of war and rising interest rates converge, buyer psyche and purchasing power are not immune. Despite the challenges and stresses however, our market remains strong and responds most favorably to properties that are realistically priced and show well.
For seven straight weeks, interest rates on a 30-year fixed mortgage have risen to 5.27%, up 2.98% from a year ago, the highest it’s been in nearly 13 years. Unlike previously when the Fed raised rates in quarter point increments, in the first week of May, rates jumped a full half a percentage point, the largest increase since 2000, and Fed Chair Jerome Powell cited more possible raises are “on the table” in June and July. While there are numerous ways for borrowers to buy down rates, mainly with points or by transferring funds, the quick escalation of successive rate hikes puts pressure especially on those most sensitive to financing fluctuations like first-time purchasers and buyers of properties under $2M.
So far, the pace of signed contracts this spring has been pretty steady with 2% increases weekly. Will the market decelerate with a pull back because of rising rates? So far, not. However, sellers are cautioned to make their deals now before the seasonal slowdown of the quieter summer months arrives. For now, demand remains high, and more properties are going to contract than new listings are coming on.
Noah Rosenblatt of Urban Digs suggests a “pull forward of demand” this quarter from buyers with FOMO (Fear Of Missing Out) who were planning to buy later in the year. His partner John Walkup sees “demand in overdrive” and there’s truth to both. It’s entirely possible that supply and demand may be able to find more balance this quarter as we slowly trend away from a seller’s market. Even as rates rise, many renters will be looking to make a purchase because rentals are accelerating even more.
Even our suburban neighbors may be cooling off somewhat this quarter: from the overheated pandemic years of 2020 and 2021. The number of days on their market is rising while multiple over-bidding is waning. Instead of a dozen offers on the first day of showing, perhaps only a handful of bidders compete over asking.
Since Manhattan never experienced the steep 30-50% run up in prices as other parts of the nation, our reaction to rising rates will be more subdued than the rest of the country may experience. Stay tuned and reach out if you need an experienced trusted advisor to help you navigate what comes next.
Shirley Hackel, NYRS®
shirley.hackel@compass.com | (914) 980-0371