BUYING BROOKLYN REAL ESTATE WITH HIGH MORTGAGE RATES

The volatile journey of mortgage rates has been a topic of concern since 2023 began. The rates saw a continuous dip for five weeks between March and April, followed by an increase for the next two weeks, and then a decline once again. As we moved into May, mortgage rates have stayed relatively stable, with the average for a 30-year, fixed-rate mortgage reported at 6.39% for the week ending May 18, a slight increase from the 6.35% in the previous week, as per data from Freddie Mac.

Many are hoping for a halt in further increases by the Federal Reserve or even a potential start of rate cuts. However, the trajectory is still ambiguous given the fluctuations in the economy.

What should prospective homebuyers do in such unpredictable economic circumstances?

For potential buyers who require financing, it's important to stay alert and be ready to seize an opportunity during a dip in rates. But for those with the financial capacity to buy with cash, the current market climate offers you more strength and negotiating power, particularly in the supply-restricted market of New York City.

Finding two or three-bedroom apartments with outdoor spaces in Brooklyn is proving to be a challenging task currently. More often than not, cash buyers are the successful contenders for such properties.

The proportion of all-cash transactions in New York City's real estate market has hit an all-time high. As reported by The Real Deal's analysis of citywide sales data, cash buyers accounted for an astounding 60 percent of condo sales in Manhattan this year.

Similarly, cash transactions have represented 37 percent of condo deals in Brooklyn, and 40 percent in Queens this year. All of these figures are unprecedented since records began in 2018, according to the same analysis.

Mortgage Rate Predictions for the Rest of 2023

What does the remainder of 2023 hold for interest rates? Here's what specialists anticipate for the impact of market conditions on the 30-year, fixed-rate mortgage in the upcoming months:

• Freddie Mac chief economist, Sam Khater. “[W]ith the rate of inflation decelerating rates should gently decline over the course of 2023.”

• National Association of Realtors (NAR). “[F]orecasts that … mortgage rates will drop—with the 30-year fixed mortgage rate progressively falling to 6.0% this year and to 5.6% in 2024.”

• Zillow Home Loans senior macroeconomist, Orphe Divounguy. “A fight over raising the debt ceiling is likely to drag into the summer, and mortgage borrowers should expect rate volatility as a result.”

• Mortgage Bankers Association (MBA). “Long-term rates have already peaked. We expect that 30-year mortgage rates will end 2023 at 5.2%.”

• Rinaldi Group president, Stephen Rinaldi. “[R]ates will begin [to] slide into the summer, beginning a slow but relatively steady lowering of interest rates.”

Where will the NYC Market Go From Here?

Predicting market developments in the second quarter is challenging due to various factors. The stability of regional banks remains to be determined, as exemplified by UBS absorbing Credit Suisse, indicating that the banking crisis isn't confined to the United States. Concurrently, inventory scarcity persists in several New York City market segments, leading to a limited selection for even the most cautious buyers.

The unpredictability of the stock market, coupled with inflation, may continue to be prevalent, although there is hope for stabilization as the year progresses. Various elements make it challenging to forecast what the summer and fall might bring. However, the period of substantial price drops appears in the past, and property prices have leveled off. It's a reasonable time to strike a deal.

BUYING OR SELLING NYC PROPERTY?

Whether you are looking to purchase or sell a home, or need to do both simultaneously, I have the experience and intimate knowledge of the New York City Real Estate Market to help you achieve your goals.