How do you perceive the market? Half full? or Half Empty? It depends on your perspective and your circumstances. Seize the market you’re in; time in the market virtually always trumps waiting. In this market it would be about securing the property you want while demand is moderate. It’s only going to get more expensive and competitive from here. It’s like having the park to yourself in the winter; in the summer, when the conditions are optimal, it’s packed and they’re lines for everything.
Interest rates are in the 6-7% range for the foreseeable future…it is what it is. Note, the average 30-year fixed mortgage from 1971 to 2025 is 7.72%. So, ask yourself if you view the current situation as half-full or half-empty? In October 2023 rates were at 8%. The Fed set out to drop rates 1% in 2024 (which they did), another point in 2025 (which is a fading endeavor and will likely be a ½ point by year’s end, if that) and a half point in 2026 (TBD). Regardless of the slowing pace of the drops, the psychological effect on the marketplace, coming off of 8%, has been positive.
A hot economy, lower unemployment and sticky inflation continue to buoy mortgage rates; this will moderate what is STILL anticipated to be a robust year of deal-volume. Record rents will continue to pop holes into the damn of pent-up demand for purchasing. Buyers are adjusting their purchase budgets to match our new normal (in the 6-7% mortgage rate zone) and simply executing their life’s plans.
The more powerful of the headwinds will be inventory; expected to be less than ample, further solidifying the floor in prices. We are currently 7% lower than last year at this time and the lowest since 2016/17. This is important because, although measured, price trajectory is pointing upward. Statistically this will be enhanced, as sales in the luxury sector are expected to be brisk; the lower price points tend to be more challenged when inventory is tight and mortgage rates “feel” elevated-ish. Remember, unlike the whiplash in prices that affected the rest of the country due to the pandemic, Manhattan has had price stability, which encourages confidence.
Conflicting signals: It’s a double edged sword. In order to have rates drop, the economy will have to slow and/or inflation will have to drop more. That scenario would be advantageous for a purchase, but not a good sign for the overall economy. While positive for buyers, lower rates do invite a lethal metric…competition…which translates to higher prices. Similar question, would you view one of these scenarios as half-full or half-empty versus the other? It’s all in your perception; seize the market you are in.
The unpredictable: It will take time to learn the actual policy effects of the incoming administration. Issues like tariffs, tax cuts (including SALT) and immigration will all be factors. We’ll keep an eye on these together.
I always say: 1) Anyone interested in buying or selling, should be rolling up their sleeves to determine whether the time is right to sell or if there’s a home/investment property out there for them; and 2) Who represents you matters…your best investment is often in the broker you choose; find someone with experience, who you feel you can trust.
