Late Q1 has seen the real estate market gain steam. While we’re still in a buyer’s market, we’re slowly seeing buyer’s lose leverage and shift towards more balanced territory. Contract activity was up 13% in February compared to last year and we saw a big spike last Friday with almost 70 contracts signed. However, the average listing discount is at about 6.9% and trending up, suggesting we’re still in a very price sensitive market. With all of the uncertainty surrounding the coronavirus, politics and the financial markets, we’ll have to see if corrected pricing and extremely low mortgage rates are enough to keep things stable.
Rental Commission Update On Friday, the office of New York Attorney General Letitia James requested an extension to respond to the real estate industry’s rental commission ban petition. The parties will now meet in court on June 12, as opposed to the original March 13 date.
The petition was filed last month in Albany Supreme Court after the Department of State issued guidance that effectively banned tenants from paying broker fees for an agent hired by the landlord. It marked a reversal of the long-standing practice of tenants footing the bill in New York City’s rental market. Less than a week after the state guidance was issued, a New York judge granted a temporary restraining order that barred the state’s guidance on tenant-paid broker fees from going into effect.
Historical Mortgage Rates The FED has responded to the spreading of the coronavirus with an emergency rate cut to help stimulate the real estate market. The weekly decline saw mortgage rates fall to the lowest level in its almost 50-year history. Besides creating opportunity for buyers, we expect to see record breaking refinance applications. Even with financial market turbulence, we've seen savvy buyers who have waited on the sidelines looking to pull the trigger before they miss out on this historical opportunity.
Purchasing Power This Year vs. 18 months ago
Example below reflects today's 30 year fixed rate of 3.125% vs. rates of 4.625%, just over a year ago.
$1M borrowed at 3.125% = $4,284/month
$1M borrowed at 4.625% = $5,141/month
That is a difference of $857/month or $10,284/year.
Alternatively, we could look at it this way:
At 3.125%, $4,284/month will afford you a $1M mortgage.
At 4.625%, $4,284/month only afforded you a $833,430 mortgage
That is 20% more purchasing power than 18 months ago, just because of a drop in interest rates.