Higher rates are actually protecting real
buyers from what's worse...competition.
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Everyone says, it’s all about the rates...sort of; but perhaps not in the way you're thinking about it. My Father will tell me this is too long, but I think the concepts are important to communicate.
Purchasing Power
What will happen if (WHEN) interest rates drop a point.
Currently the 30 Year Fixed Mortgage is at 7.22%
$1M borrowed at 7.22% = $6,801/month or $81,612/year
Imagine when interest rates drop to say 6.0%
$1M borrowed at 6.0% = $5,996/month or $71,952/year
That is a difference of $805/month or $9,660/year
And eventually interest rates are anticipated to drop even further,
into the 5% range within the next 12-24 months
Alternatively, we could look at it this way:
At 7.22%, $6,801/month will afford you a $1,000,000 mortgage.
At 6.0%, the same $6,801/month would afford you a $1,134,500 mortgage.
Naturally, the above analysis makes someone think they should wait to buy, when financing is cheaper. The problem is when competition is elevated, you may never even have the opportunity to secure a property to work with. It’s like not having a restaurant reservation at a good place; if you can’t even get in, how can you eat?
How you digest and interpret the above...and strategically weigh
all the combating forces that influence our marketplace,
particularly the competition of the moment, will dictate your success.
So right now, the higher rates are actually protecting real buyers
from the masses...and that includes sellers. Here's how:
Remember when I asked: “Are you thinking of buying next year?...so is everyone else!” Well, it’s all perception. In the big picture of what is required to purchase a property in Manhattan, rates are an extremely important metric, but…like price…is not the most important. The most important component to the buying process is the competition* and it's THE biggest barrier to entry into Manhattan.
Where are we? Rates are higher (much higher) than they were. So from a relative perspective the increase is painful. For years, we had been in a very artificially low interest rate environment, which we sadly believed was normal. Moving forward, it’s hard to predict where rates will settle in 12-24 months. One thing we all agree on is, rates have over doubled in the past 15 months (from 3% to 7%+). As a result, the dance floor of both buyers and sellers as been cleared, leaving only those truly committed to the task. You would think this weakness would soften prices…but no, inventory has been tight. See the following two charts which make those buyers, who’ve been dreaming of tumbling prices, cry.
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Click on each respective chart to expand. Courtesy: UrbanDigs
Both the median price and the $/sqft of units in Manhattan have been flat over the past year, if not gone up slightly. With this level of price stability, at a time when rates have spiked like no other occasion in our lifetime, one can only conclude that any decrease in rates will generate a substantial increase in demand (competition*) and put upward pressure on prices. Consequently, any notions and/or hopes for a major downward price correction are faint. Meaning the correction has likely already occurred.
Buyers feel their purchasing power will be stronger when interest rates come down. True, except that demand will likely out-leverage purchasing power. So what happens when those rates actually do drop? The velocity of buyers entering the marketplace will immediately accelerate. In all of the market cycles I have experienced in my 25 years of selling Manhattan real estate, this type of shift happens ever so quickly, too often leaving most buyers looking at each other saying, “what just happened; the market was just dead.” This is the oh-so-typical Manhattan story, when pent-up demand from both buyers and sellers could be prohibitive.
So your buying strategy options are:
A) wait for falling prices = unlikely to happen.
B) wait for rates to fall = this may not occur until Spring, if not summer. And again, everybody is thinking the same thing, "I will buy next year when rates come down", meaning palpable competition*. Hurd mentality and FOMO will ensue. Just think, you could have actually secured a property by then, begun to build equity and then simply refinance when rates eventually moderate. If you wait, prices will most certainly be higher as a result.
C) just get to the business at hand and jump in. Whatever saying you prefer: the early bird always gets the worm or early adopters always win...you get the point.
Interestingly, most Sellers have not wanted to engage in this high interest rate environment either; primarily because, they've not wanted to give up their own low mortgages. This has aggravated an already tight supply dynamic. September's typically robust inventory flow could serve to ease some of that pressure. There's also hopes that the "life happens" principle begins to leak in, meaning that people simply have to move...divorce, children, new jobs etc.; this should also free up more property.
The best deals are still those that require renovation.
See chart below, renovated apartments are trading at a 30% premium.
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Click chart to expand. Courtesy: UrbanDigs
I always say: 1) Anyone interested in buying or selling, should be rolling up their sleeves to determine whether the time is right to sell or if there's a home/investment property out there for them; and 2) Who represents you matters…your best investment is often in the broker you choose; find someone with experience, who you feel you can trust.
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Featured Property:
An Art Collector’s Manhattan Mansion
Asking $95,000/month
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* M A N H A T T A N - M A R K E T N E W S *
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* H A M P T O N S - M A R K E T N E W S *
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Summer is over and we seem to be seeing a normalization happening. Seasonal shopping seems to be back in swing, similar to pre-pandemic times. Inventory pressures have eased and there seems to be a bit more time to absorb the what's out there. Whereas deals seem moderate, we expect some decent activity regarding contracts getting signed as we get deeper into the season. With time, meaning over the next 12-24 months, we should be seeing more opportunities revealing themselves.
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As a buyer, you need to know how to identify the right opportunity for you and when it makes sense to jump in...or not. Everyone's circumstances are unique. Like Manhattan, one needs good representation to successfully maneuver the nuances that exist in this unique marketplace. Let me know if you need help.
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A weekly podcast on real estate in the tri-state area,
around the country and even globally.
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Thursday's from 3-4pm
See you then.
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* What representation looks like * |
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Click on each respective image to see video. |
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* MORTGAGE & INTEREST RATES * |
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Chart Courtesy: Wells Fargo |
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* Most Recent MARKET REPORTS * |
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The Latest Market Reports - Sales:
Second-Half 2021 Brooklyn Townhouse Report: click here
Other Markets:
Hoboken/Jersey City 2nd Quarter (2023): click here
Interactive Rent vs. Buy Calculator:
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These are great local resources, especially at times like these. Here are some of the best and most comprehensive neighborhood blogs that are helping to keep us informed. Click on each. |
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With Patch you can choose New York City; however, they also have more concentrated areas categorized as follows: Central Park, Upper West Side, Upper East Side, Midtown-Hell's Kitchen, Harlem, Astoria-Long Island City, Chelsea, Gramercy-Murray Hill, West Village and East Village.
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Manet/Degas
Coming soon: September 24, 2023–January 7, 2024
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"This exhibition examines one of the most significant artistic dialogues in modern art history: the close and sometimes tumultuous relationship between Édouard Manet and Edgar Degas. Born only two years apart, Manet (1832–1883) and Degas (1834–1917) were friends, rivals, and, at times, antagonists who worked to define modern painting in France. By examining their careers in parallel and presenting their work side by side, this exhibition investigates how their artistic objectives and approaches both overlapped and diverged.
Through more than 150 paintings and works on paper, Manet/Degas takes a fresh look at the interactions of these two artists in the context of the family relationships, friendships, and intellectual circles that influenced their artistic and professional choices, deepening our understanding of a key moment in nineteenth-century French painting.
Manet/Degas is organized by The Metropolitan Museum of Art, New York, and the Musées d’Orsay et de l’Orangerie, Paris." Click here for more.
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The Hottest Restaurants
Open Right Now
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The ravioles du Dauphiné at Café Chelsea. | Noah Fecks/Café Chelsea |
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Eater's Heat Map (click below) - Some of the Hottest Restaurants open right now:
Eater editors get asked one question more than any other: Where should I eat right now? Here, we’ve put together a map of the latest Manhattan debuts drawing NYC’s dining obsessives.
New to the list in September: Cafe Chelsea [MY CHOICE for sure!!!!], a French bistro inside the Hotel Chelsea, and a new location for the lasagna-famous, I Sodi.
For more New York dining recommendations, check out the new hotspots in Brooklyn and Queens.
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Exploring delicious destinations with
Rob Rosenthal
Travel is about engaging with other cultures, learning histories, and seeing beautiful sights, sure... but for plenty of us, it's also about the food. In three upcoming courses with cookbook author, journalist, and host of the weekly All You Can Eat podcast, Rob Rosenthal, takes your taste buds on a worldwide tour. First, start with Nayarit, Mexico, a coastal city and popular travel destination known for its fresh fruits and vegetables, and its abundant seafood dishes. Next, find the incredible food culture in luxurious Dubai, a veritable melting pot of cultures. Finally, take a stop in the country with some of the most famous, diverse, and beloved cuisines: India.
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Cookbook Author, Culinary Journalist and Food Humorist©, Rob is a Manhattan born man-about- town who writes, produces and hosts programs about food. I highly recommend his new book for Dads like myself. There is a new kind of dad, and he's doing far more domestic duty than at any time in history, including cooking. Although it's written with a sense of humor, this book is a serious resource for dads and anyone else interested in upping their game to make great tasting foo d bat home, even if they have never used a chef's knife or a roasting pan before.
Upcoming Courses include:
Note: These are live, virtual courses hosted by Roundtable, which include interactive opportunities and post-course recordings available for all course participants.
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Rob is also on iHeart Radio & SPOTIFY with his ALL YOU CAN EAT podcast about delicious food, cooking and luxury travel.
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PRIVATE ONLINE COOKING CLASSES:
Ask Rob about his privates…by which he means that he offers customized cooking lessons to individuals and to groups. You learn, you laugh, and you eat well.
Now that ALL of us need to pitch in when it comes to feeding the family, I suggest picking up some serious tips from Rob. As he says, he went to cooking school so you don't have to. These sessions are fun and literally provide prized skills for upping your game. Enjoy. See Rob's intro here.
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Curate provides you with the ability to prepare your home for sale
with no up-front costs,100% payable at closing.
Services include Cleaning/Decluttering, Renovation, Staging & Design
and more. Contact me and/or click here to learn more.
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New York City * The Hamptons * Palm Beach
Connecticut * Miami
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With Partnering Worldwide, Brown Harris Stevens continues to leverage its very productive relationships with top brokerages nationally and internationally by inviting partners to high- light key properties in their respective markets on BrownHarrisStevens.com, and to feature our important properties on their sites. Learn more.
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With Partnering Worldwide, Brown Harris Stevens continues to leverage its very productive relationships with top brokerages nationally and internationally by inviting partners to high- light key properties in their respective markets on BrownHarrisStevens.com, and to feature our important properties on their sites. Learn more. |
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- Recognized by New York Magazine & Five Star Professional as one of the "most accomplished real estate professionals in New York City."
- Ranked nationally by REAL Trends as one of "America's Best Real Estate Agents" for avg. sales price of $4.350M.
- Recognized member of the 2016 "TOWN Elite" class
- Sold a single family Townhouse faster than any other on the Upper West Side over $10M to date. (StreetEasy)
- Certified Negotiation Expert (CNE)
- Trivia: Won the 2015 New York Times NCAA Basketball Pool.
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Roberto Cabrera
Licensed Associate Real Estate Broker
New York City * The Hamptons * Palm Beach * Miami
rcabrera@bhsusa.com
o: 212-906-0554
m: 917-701-3907
Clubhouse: @cabrera_roberto
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Brown Harris Stevens
1926 Broadway
New York, NY 10023
(917) 701 3907
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Disclaimer: The opinions and content in this newsletter are assembled solely by Roberto Cabrera for informational purposes only and does not constitute financial, tax, investment or legal advice. Everyone has unique circumstances and should consult the their own respective professionals.
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