We have been experiencing a sudden shift in real estate activity in NYC as we get deeper into the Fall market. The unprecedented rise in interest rates have put many buyer searches on pause. Historically, first-time buyers made up about 40% of the market. But the share of first-time buyers fell to 26% during a recent 12-month survey period, from July 2021 through June 2022, plummeting to the lowest level since tracking such data began in 1981. The median age for first-time buyers was, at 36, the oldest it has ever been since 1981, as was the median age for repeat buyers, which rose to 59, during the survey period. People from the ages of 55 to 74 accounted for 42% of home buyers, while the share of people from the ages of 25 to 34 accounted for only 14% of buyers.
Some items to consider as 2022 carries on:
Rising Mortgage Rates Last Thursday brought more bad news for borrowers, as another rate hike will cause the cost of credit-fueled deals to rise further, but there may be a little light at the end of the tunnel. The Federal Reserve approved a fourth straight 75-basis-point hike to a target range of 3.75 to 4 percent on Wednesday, raising short-term borrowing rates to their highest levels since 2008. Mortgage rates already reached a 21-year high last month. The average 30-year fixed mortgage rate rose for the 10th straight week to 7.16% for the week ending Oct. 21, before edging down to 7.06% last week.
Cash is King Over the past year, average down payments in the US’s 50 biggest metros have grown by more than 35%, based on 30-year fixed-rate mortgage data from Jan. 1 through Oct. 10, 2022. The 5 metros with the largest downpayments are San Jose, San Francisco, Los Angeles, San Diego and Seattle. Nationwide, all-cash purchases accounted for 35.4% of all single-family home and condo sales in the 2nd quarter of 2022, the highest level since the first quarter of 2014. Investors bought 24% of all single-family properties sold nationwide last year, up from 15-16% annually going back to 2012. NYC is typically somewhat isolated from the rest of the country when it comes to rate hikes, with 41% of all homes (condos, co-ops, and 1-4 unit properties) sold in the past decade being purchased with cash.
Opportunities For primary users, it seems no-one wants to undertake a renovation and many buyers are willing to pay a premium for turnkey properties. There are benefits for those who are willing to stomach a renovation:
- You can get exactly what you want.
- You are not paying a premium for someone else’s work that you may want to change anyways.
- It will probably cost less to do the work than buy a mint product in this market.
For investors, as interest rates rise, opportunity grows as the pool of renters grows:
- There are new rental tenants unable or unwilling to buy homes because of higher interest rates.
- Many buyers are in 'wait and see' mode and have chosen to rent instead of buy.
Both groups are certain to fuel demand for rental properties which make for solid investments as they produce strong demand act as a hedge against inflation and deliver notable tax benefits. While rental rates may slow in their upward trajectory, 2-4% annual escalations add up.
Luxury Market 14 contracts were signed last week in Manhattan at $4 million and above, four fewer than the previous week. There were seven condos, five coops and two townhouses in the mix. Overall, high end Manhattan signed contract volume for the months of July through October are up about 38% compared to 2019…..a more ‘normal’ market than comparing to last year.
Brooklyn Expansion We’re thrilled to welcome Brian Blessinger to our team. A Clinton Hill resident, Brian is a trusted and attentive Brooklyn expert with over 15 years of sales and marketing experience. Many of you may already know him, as we have been partnering with Brian for almost a decade on many of our Brooklyn transactions, but we’re excited to have him join us officially as we expand our Brooklyn footprint!
Crain’s New York Business Fast 50 We are excited to share that Compass has been named one of Crain’s New York Business Fast 50 for 2022 – a ranked list of the fastest-growing companies in New York City! The list, which measures revenue growth from 2018 to 2021, shows Compass grew 626% during that period and puts us at the top of a very well-respected list of companies. The full rankings can be found here.