August saw a rise in market activity as mortgage rates dropped to their lowest since May 2023. The average 30-year fixed-rate mortgage fell to 6.47% in early August, marking the biggest weekly drop of the year. This, combined with stock market uncertainty and high rental prices, sparked increased buyer interest. In the first half of August, 428 contracts were signed in Manhattan, an 18% increase from the same period last year.
Spring Market Slump and July Recovery: The spring market struggled, with contract signings down over 8% year-over-year in both Manhattan and Brooklyn. Manhattan experienced an even steeper decline in June, dropping over 11%, while Brooklyn saw a modest 2.5% gain. However, July brought renewed optimism with hopes of a rate cut in the fall. By mid-July, the futures market priced in a 95% chance of a Federal Reserve rate cut in September, stabilizing the average 30-year fixed-rate mortgage at 6.77%.
Interest Rate Expectations Driving Market: In late August, Federal Reserve Chairman Jerome Powell indicated that it’s time to start lowering interest rates, driven by falling inflation and a cooling labor market. The question now is how fast and aggressive these cuts will be. Morningstar reports that the futures market is predicting almost 2 percentage points of cuts by July 2025, which could further lower mortgage rates.
Refinances Are Bouncing Back: Refinancing activity surged, with applications up 94% compared to a year ago, though from a low base. Mortgage rates for 30-year fixed loans dipped slightly, and while refinance applications decreased by 0.3% for the week, they remain a bright spot in a market impacted by high rates and weak homebuying activity.
Luxury Market: Manhattan’s luxury market remained strong in August, with 73 contracts signed, up from 60 last year, making it one of the best Augusts in the last decade. Brooklyn’s luxury market was steady, with 15 properties entering contract, matching last year’s numbers. However, the days on market fell significantly, continuing a trend of faster sales.
Rental Market: In July, the average rental price in Manhattan increased slightly by 0.08%, while year-over-year, the average price for a non-doorman studio fell by 5.11%. The best performer was non-doorman two-bedroom units, which saw a 4.26% increase. As we approach fall, more concessions are becoming common in the rental market.
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