It’s that lovely time again: The leaves are falling; interest rates are falling… Autumn is in the air.
As we head into pumpkin spice and sweater weather, it’s time to look ahead and see how the rest of the year might play out in terms of real estate.
Along with the season’s first chill began to fall upon us, we saw some positive impact on mortgage rates in mid-September — a nice sharp decline in recent months, reflecting growing odds on a lower Fed fund rate soon.
Also at that time, the buzz had been that the fall market would to be predicated on the Federal Reserve’s rate cut and whether it would have any additional positive impact on mortgage rates. The Fed rate doesn’t necessarily guarantee lower mortgage rates, however; in fact, the information released on September 18th could have caused tremendous upheaval.
Ultimately, the Federal Reserve cut rates by 0.50% rather than the anticipated 0.25% — but the bond market lost ground, at least initially. There are two potential reasons for this: the dot plot, a chart that records each Fed official’s projection for the central bank’s key short-term interest rate, and Federal Reserve Chairman Jerome Hayden “Jay” Powell’s press conference. The dot plot left bonds in slightly better shape, but not so Powell’s proposal, which failed to show visible concern about the labor market and stayed clear of declaring victory on inflation.
Combine all that with a bond market that had been in a relatively aggressive position heading into “Fed Day,” and the moderately weaker closing levels are about as boring and logical a result as anyone could imagine.
Time will tell how the Fed’s punting goes for buyers who will continue to go against the grain given the opportunity rush — an approach that may still be well worth taking.
Regardless, downtown continues to rally very well in contrast to uptown. This is predominantly due to the number of condos available that allow for income-producing investments and pied-à- terre products suitable for young professionals sans families.
Co-ops are still struggling to hold footing, with only four co-ops versus 21 condos trading over $4M in September. This phenomenon stems primarily because co-ops tend to have a negative connotation with less ownership control, less privacy, and more stringent financial disclosure requirements, which can be intimidating and off-putting for anyone struggling to recover from job loss, student debt, and business bankruptcy. Even if these are solvent ways to remediate toxic situations, they can be deemed blemishes.
The good news for buyers is that now is likely one of the most incredible times to get value for a large, serious property. It is also a very advantageous time to upgrade and take possession of a bigger unit. For example, buyers pushing for a one bedroom might be able to nab a two-bedroom place for the same price.
For sellers, given the lack of inventory, newer inventory that is in excellent condition (or priced smartly) and positioned cleverly can garner a lot of traction from an otherwise lackluster market in a short window of time. We are seeing value products that are well-finished, with good components, fetch more than one offer and go to a best-and-final offer, resulting in a higher trade price than some lesser comparable units.
Meanwhile, all eyes will remain on the election, although, as mentioned in a previous newsletter, some people will be wary of change regardless of which party wins.
As fall turns into winter, many pending questions will finally be answered — Who is the new president? What will interest rates be? — and while that won’t be a cure-all for all doubt, it may appease some fears of the unknown as we head into the new year.
