Buyers Continue to See More Opportunity as Affordability Improves

The Weekly Recap

Mortgage rates fell again this week, Central Banks are trying to quell investor sentiment of six rate cuts this year, stronger than expected retail sales data is hurting the expectations of a Fed rate cut in March. The bill for a record amount of commercial real estate debt is coming due, policymakers at the Fed feel they are “within striking distance” of reaching their 2% inflation goal. Apple was banned from selling watches in the US with blood oxygen sensors and tensions continue to rise in the Red Sea threatening to increase inflationary pressures with a backed up supply chain.

Buyers Continue to See More Opportunity as Affordability Improves

Mortgage rates continued to decline to their lowest level since March 2023 creating new optimism for buyers as they enter a market with low inventory. Prices remain elevated and will stay that way until more inventory starts to come on the market. The optimism and positive momentum of downward trending rates has been enough to give people who have been waiting over a year to toss their hat seriously in the ring to start exploring purchase opportunities that might have seemed out of reach just a few short months ago. Even with the median asking price in Brooklyn jumping 13.5% to $1.05 million, buyers are looking to get in before more competition enters the market place. Asking prices citywide are also up to a median price of $1.095m, up 10.6% from a year ago.

On the high-end luxury market, we’re seeing the most negotiating room occurring amongst listings over $4.95 million. In Q4 of 2023, homes in those price points received 92% of their initial price point. While its often usual for higher priced units to have higher levels of reduced pricing, the current median sale to list ratio is much lower compared to the same period in 2022.

Traders and the overall market are betting heavily that the first round of rate cuts will happen in March based on historical trends but with the recent report of stronger than expected retail sales and the sentiment coming from Central Banks, the market might be counting their proverbial chickens before they hatch.

The reason for the steady decline and drops in interest rates is that the ten year treasury yield has continued to drop which has been pushing rates lower. If investors become more bearish that cuts wont occur until the end of Q2 2024, we may see that upward pressure reflect on interest rates.

Although home building has slowed, permits for future building is up, giving more indication that more inventory is on its way to alleviate the pricing pressures of a market that is screaming for more inventory. UrbanDigs considers the current market conditions in NYC to favor the buyer where I believe there is more of an equilibrium now, more than ever in the past few years, between buyers and sellers. Yes, there is more negotiability, but that negotiability can be contributed to the days on market being longer for sellers and their impatience for rates to drop.

Market Performance

Here are how some other indexes and asset classes have performed as of this mornings opening bell.

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past week as well as newly signed contracts in Manhattan.

Mortgage Rate Update

Mortgage rates decreased this week, reaching their lowest level since May of 2023. This is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability. However, as purchase demand continues to thaw, it will put more pressure on already depleted inventory for sale.

News You Can Use

• Markets Expect Rate Cuts Soon. Central Banks Say Not So Fast. Wall Street Journal

• US Jobless Claims Fall to Lowest Since September 2022 Bloomberg

• The Bill Is Coming Due on a Record Amount of Commercial Real Estate Debt Wall Street Journal

• Fed Rate-Cut Wagers for March may Lean Too Heavily on History Bloomberg

• Wall Street Banks See Dealmaking Comeback on Fed Pivot Bloomberg

• Sticky Inflation Could Prove Hard to Conquer Axios

• Renters Are Being Hit Harder By Inflation than Homeowners Are CNN

• US Housing Starts Decline While Building Permits Pick Up Bloomberg

• Apple Again Banned From Selling Watches in US with Blood Oxygen Sensor CNBC

• Jamie Dimon Warns ‘All These Very Powerful Forces’ Will Impact US Economy in 2024 and 2025 CNBC

• Rogoff Sees Six Fed Rate Cuts as ‘Pipedream’ If Economy Holds Up Bloomberg

The Deep Insight

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