Homebuyers gain negotiating power: StreetEasy

Sellers soften as buyers wait for lower mortgage rates, more inventory

Negotiability on the Rise for Homebuyers: StreetEasy
Compass' Raquel Lomonico and The Agency's Mike Biryla (Compass, The Agency, Getty; Illustration by The Real Deal)

Buyers in New York City’s residential market are gaining leverage — for now. 

The typical citywide discount for a home sale in December was 4.2 percent off the list price, according to a report from StreetEasy. That’s up from 3.8 percent at the end of 2022.

It’s a trend agents say they’re seeing anecdotally, and that will likely lead to lower asking prices as sellers adapt and price their homes more competitively.

But they say the spring selling season could undo that trend.

“I think people are going to be in for a very rude awakening once we get to the spring market,” said Compass agent Raquel Lomonico, explaining that a potential interest rate cut and seasonality will bring a big enough surge of buyers to erase the usual uptick in listings, and then some.

The rise in negotiability comes from buyers sitting on the sidelines as they wait for mortgage rates to drop further and for an increase in for-sale inventory.

The average rate for a 30-year fixed mortgage was 6.66 percent last week, according to Freddie Mac, and has been on a downward trend since peaking at 7.76 percent in late November. But it’s still more than twice what it was early in the pandemic, and the Federal Reserve has created expectations that borrowing will become less expensive this year and next.

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The dearth of buyers has caused listings to sit on the market, which makes sellers more receptive to negotiation.

Some of the biggest discounts are in the luxury market, which StreetEasy defines as homes asking $4.95 million or more. Although asking prices are up year-over-year, a typical luxury home sale was discounted 7.6 percent from the asking price in the fourth quarter, up from 4.6 percent a year earlier.

“While it’s typical for highly priced homes to sell with larger discounts, the sector’s current median sale-to-list ratio is much lower compared to the same period in 2022 — indicating the upper hand is shifting more clearly from sellers to buyers,” the report stated.

Agents say there’s also strong negotiability in the new-development market.

“A lot of developers are saying if you come in at full ask, we’ll give you a 2 percent [mortgage rate] buy-down for two years and [pay for] transfer taxes, sponsors’ attorney fees…  [and] I am seeing some negotiations on common charges, where they’ll pay the common charges for a year,” said Lomonico.

But demand is strong for well-priced apartments, said The Agency broker Mike Biryla, suggesting the market could shift quickly in the spring.

Rate cuts by the Federal Reserve in March, which Goldman Sachs predicts, could also catalyze buyers, according to Lomonico. Previously, prognosticators thought the first rate cut wouldn’t come until mid-year.

“There’s no inventory of two-beds, one-bathroom apartments on the Upper East Side with washer/dryer in-unit,” Biryla said.  “Those typically trade for a million. I priced [one] at $995,000 … We literally had seven offers the first week and we sold for 3 percent over ask, all cash.”

But he’s had to de-list other units until the spring, the busiest season of the year, so they don’t seem stale when the market picks up.

“If you’re still actively looking to buy something —  it’s hard not to sound like a salesman — but this is the absolute best time to pull the trigger,” he said. “There will be new inventory [in the spring], but it’s not going to be this tremendous dump of inventory people are expecting.”

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