Welcome to April!
A lot happened in March! Here a few of my observations and thoughts to summarize:
During the month of March, we saw the historically significant failure of three large banking institutions: Silicon Valley Bank, Signature Bank and Credit Suisse.
In the wake of those failures, with market concern about broader risks to the banking sector and economy, we experienced a sharp drop in mortgage rates into the mid 6% range and an uptick in mortgage applications.
The swift government response guaranteeing depositors and expanding bank liquidity options, along with subsequent bank takeovers, helped calm the market resulting in an equity rally and uptick in mortgage rates.
Mortgage rate volatility can hamper buyer demand as it strains affordability. In real terms, for a buyer looking at a $1,000,000 home with 20% down on a 30-year fixed mortgage, a 0.50% reduction in rates results in a lower monthly payment of $266 or 5% of that monthly payment.
While the Federal Reserve increased the benchmark Fed Funds rate by another 25 basis points, there’s an expectation by many that the recent bank failures and possible credit tightening may lead to a halt or possible slowdown in future rate increases. That may be welcome news for buyers and sellers in the future. However, tighter credit may create additional challenges.
Buyers continue to be active in the market. Demand, as measured by pending sales, has been on an upward trend in both Brooklyn and Manhattan since the beginning of the year. If rate relief continues, it should provide a further boost.
The big issue for buyers continues to be limited supply. Inventory is tight by historical standards and tighter in Brooklyn than in Manhattan. Because of limited supply, buyers can still expect to see more competition on listings than they otherwise might expect, particularly for prime properties.
Open house activity during March was strong with buyers out in force as the weather improved and more Spring supply rolled onto the market. Certain segments of the market are still seeing multiple offers on properties. A recent listing of mine in Park Slope saw very strong demand in two open houses and received multiple offers. While listing success can be hard to predict, it ultimately comes down to optimized alignment across market, timing, product and price.
I still see a strong base of core demand among my buyer clients, many of whom are first-time home buyers. Market volatility and higher rates are frustrating and create timing and affordability challenges. However, the drive for more and better living space, capital investment in a historically appreciating asset and greater desire for permanence given family, job and other considerations are key drivers in the desire to own their own home.
New listings are increasing, as they usually do this time of year, but not as quickly as in the past. Lack of new listings is exacerbated by higher rates, as prospective sellers are less likely to trade in their current mortgage for a new one at higher interest rate.
Homes in a market sweet spot that are properly marketed and priced have a good chance of selling quickly, although likely not as quickly as a year ago when demand was noticeably stronger. Since most of listing activity is captured in the first two weeks after launch, it’s best to price appropriately from the outset rather than overprice and make adjustments over time.
Sellers should consider taking advantage of the current pickup in liquidity to get properties on the market and offers into contract. Once the summer rolls around, the seasonal market slowdown combined with potential broader economic risks may have negative consequences on sale prospects.
Buyers may want to consider taking advantage of the recent rate drop and uptick in inventory as we enter the Spring. Interest rate volatility and economic uncertainty may create challenges, but buyers who are financially prepared and well-researched on alternative financing options will be able to react more quickly and competitively when optimal buying conditions and situational opportunities arise.
Those are my thoughts for now. I hope you find them helpful.
Additionally, in this month’s update, I’ve included some research, articles & various activities I hope you’ll find of interest. Click the image above for more details.
Have a great month and feel free to contact me at any time with questions or for real estate assistance.
All the Best,