The days of low interest rates may be coming to a close, but brokers said that won’t likely have an adverse impact on Manhattan’s real estate market, which has seen inventory shrink for the past several months.
Based on recent comments by Fed chairman Alan Greenspan, higher interest rates look like an inevitability, but brokers said that is not necessarily bad news for the market.
Inventory is also showing signs of improvement, with more apartments coming on the market in recent weeks compared to the beginning of the year.
At the end of April, mortgage rates rose for the sixth consecutive week in response to improving economic signs, according to surveys conducted by mortgage buyer Freddie Mac and Bankrate.
“The rise in rates is pretty evident,” said Diane Ramirez, president of Halstead. “It’s positive, and it means the economy is strengthening.”
Ramirez said the current 6 percent rates “could almost double, and they would still be attractive.”
Hall Willkie, president of Brown Harris Stevens, agreed.
“It’s so low, even if it went up a percentage point or two, it would still be strong,” he said.
Many expect the rates to make a pronounced upswing in the fall or winter, after the presidential election.
While interest rates have been favorable, what’s made business difficult in recent months has been the lack of inventory.
But Ramirez said she is starting to see more listings at Halstead.
“We were 50 percent off [in inventory] in the early part of this year compared to last year,” she said. “Now, we’re off about 20 to 30 percent compared to 2003.”
“Inventory is still pretty tight, though,” she added.
Prices, at record levels with the average apartment now approaching $1 million, according to a recent Douglas Elliman report, will increase throughout the rest of the year, but not dramatically, Ramirez predicted.
“I think we’ll see nice steady growth this year,” she said. “We’re going to see the line go up, but not vertically.”
Overall, Daren Hornig, president and CEO of Dwelling Quest, said he foresees a better market for brokers in six months.
“In all my career, I’ve never been in a market that’s been hotter – but none has been more frustrating, either,” he said. “Normally, it used to be where if you bid the asking price, you’d get the apartment nine times out of 10. Now, they don’t call you.”
“When interest rates go up,” said Hornig, “I’ll think we’ll make as much money and it will be a lot easier.”
For rentals, Hornig said the market is “starting to pick up – big time.”
Ramirez and Willkie said there are buyers who are putting off buying and renting instead because of lack of inventory and high prices, a phenomenon recently noted in a New York Times story.
But Hornig also said he is seeing an increasing amount of “sales to rental arbitrage.”
“People realize they can sell their place for an all-time high,” he said. “They might have made hundreds of thousands of dollars in gains over two years, some of which they’ll be paying in rent, but they’re still net positive.”