Acro-rate-o-phobia

Fear of rising interest rates is pushing more buyers into the NYC market

Dec.December 01, 2014 07:00 AM

A fear of rising interest rates in the months ahead is prompting some homebuyers to jump into the sales market — putting pressure on brokers to turn deals around quickly while low rates are locked in.

Although it’s anyone’s guess when — and if — rates will increase (see story on page 50), many buyers don’t want to chance it, agents said. Citi Habitats agent Corlie Ohl said she has several first-time buyers who are on the fence, but want to strike while the iron is hot. “Any interest-rate hikes might cause them to stay renters,” she said.

One of Ohl’s clients, whose lease is up in March, is prequalified to spend $850,000. “If she doesn’t purchase by July, or whenever the interest rates go up, she’s just going to rent,” Ohl said.

For the last several years, low interest rates made real estate an attractive option for investors, but cash buyers dominated the market — locking out many first-time buyers seeking mortgages on properties in the $2 million and under category, in particular.

Jeff Schleider, CEO of Miron Properties, said that within the past year, however, he’s seen a slight shift in favor of buyers seeking mortgages. He said that a year ago, less than 10 percent of deals had mortgage contingencies; now the number is closer to 35 percent or 40 percent.

“We don’t see people jumping into deals because of where rates are, but people are trying to close while they still have that rate locked in,” he said.

Agents who have strong relationships with attorneys and mortgage lenders are able to turn deals around quickly, he said, citing a recent transaction in which a Miron agent represented the buyer of a two-bedroom cond-op on West 23rd Street. Schleider said the seller had two offers for just under the asking price of $1.6 million and chose Miron’s client because the mortgage approval was already in place.

“Having an attorney and banker you can call to get a building approved within 24 hours is more valuable than anything,” he said.

A potential interest rate hike isn’t just impacting buyers. “If you already own, you need to refinance now if you’re going to,” said Ohl.

Wendy Maitland, president of sales at Town Residential, said some owners are looking to sell in anticipation of interest rate hikes. “They are making the decision to move now, not because they need to, but because they’re thinking rising rates may fuel buyers to purchase now,” she said. She said she’s seeing the trend mostly in the luxury market, where certain savvy sellers “understand that any impact in the market will potentially impact the value of the property.” And, she said, the sellers may want to invest outside of real estate.

To that end, the interest-rate question is also impacting pricing.

During the third quarter, the median sales price increased to $908,242, up 4.2 percent year over year, according to real estate appraisal firm Miller Samuel. “Sharp gains in New York City employment, the continued influx of international investors and low mortgage rates have kept the market tight,” the report stated. While “a product of five years of pent-up demand [and] the fear of rising mortgage rates, sales volume fell short of prior year records.”

“Buyers are concerned about purchasing before interest rates go up,” agreed Rebecca Knaster, an agent with William Raveis NYC. But despite having motivated clients, Knaster said low inventory has been a problem. She recently represented the seller of a three-bedroom co-op on East 54th Street, who walked away from offers close to $2 million — above the $1.76 million asking price — because the seller couldn’t find anything to buy himself.

Shirley Hackel, an agent at Warbug Realty, echoed concern about a lack of inventory. “Buyers anxious to take advantage of favorable lending conditions,” she said, “are discouraged by a lack of well-priced, quality products.”


Related Articles

arrow_forward_ios
Matt Lauer exposes Hamptons estate to the market
Matt Lauer exposes Hamptons estate to the market
Matt Lauer exposes Hamptons estate to the market
 Fredrik Eklund and the property (Getty, Steve Frankel)
Fredrik Eklund lists Bel Air mansion for rent as family moves to “forever home”
Fredrik Eklund lists Bel Air mansion for rent as family moves to “forever home”
Gordon Ramsey and his Lucky Cat restaurant (Lucky Cat)
Gordon Ramsay to open first South Florida restaurant in Miami Beach
Gordon Ramsay to open first South Florida restaurant in Miami Beach
Related's Stephen Ross and the Chelsea-Elliott Houses (Getty, Wikimedia)
Related wades into NYCHA — and becomes a target
Related wades into NYCHA — and becomes a target
Enterprise President and CEO Priscilla Almodovar (Getty)
Enterprise closes low-income housing funds after raising $365M
Enterprise closes low-income housing funds after raising $365M
Manhattan office leasing breaks 3M sf barrier for first time since early 2020
Manhattan office leasing breaks 3M sf barrier for first time since early 2020
Manhattan office leasing breaks 3M sf barrier for first time since early 2020
Lalezarian Properties CEO Kevin Lalezarian and 606 West 30th Street (Ismael Leyva Architects)
Lalezarian lands $170M loan for paused Hudson Yards tower
Lalezarian lands $170M loan for paused Hudson Yards tower
Inset: Jay Philip Parker, Alicia Cervera Lamadrid, Edgardo Defortuna
Real estate developers, brokers court Art Basel Miami Beach attendees
Real estate developers, brokers court Art Basel Miami Beach attendees
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...