Mortgage Rates in a Sluggish Market

The question that I continue to be asked is why the market in New York remains sluggish.  One agent told me he thinks it has actually been slower for longer than it was in 2008 into 2009.

One factor which could cut either way- that is, could either be causing a continuation of a slowdown, or could be the catalyst of a change in the sales pace and volume-  are Mortgage Rates.

why so sluggish?

Despite the Fed’s rate increases, mortgage rates continue to hover at annual lows.  For instance, a customer of mine just had his rate reduced by his bank from 3.875% to 3.75% as he waits for one issue to be resolved on a New Development closing.  He’s thrilled, and will save a few thousand dollars over the course of his ownership.

So- why aren’t more buyers jumping in?  Has the threat of increasing rates been taken off the table?  My customers in NYC are certainly not subprime borrowers, though that market seems to be increasingly well-covered elsewhere.  While I’m thinking of NINJA loans and some funny articles have touched upon the “lost art” of selling people houses they can’t afford.  I shudder to think of 2006-2008 coming back.  Some terrific banks and mortgage brokers like Gibraltar and Guardhill, respectively, have done a great job of filling in gaps for foreign buyers like Chinese who are having more trouble getting money out of China, or who have slightly odder balance sheets and sources of income.  All of this allows buyers of all stripes to make purchases.

I do think that underwriting has become much more stringent, even for subprime borrowers, which bodes well for banks and how well the loan perform, but perhaps has scared potential borrowers.

Further, so many banks seems to be exiting the residential mortgage business right now, by making their rates less competitive.  Citibank and Chase are two banks I can quickly think of who have been shedding mortgage brokers and have let their presence in NYC dwindle on mortgages.

Meanwhile- Bank of America, Capital One, Citizens, all have come roaring back, wanting to take market share.  Wells Fargo has a program to allow up to 90% financing for buyers who want to do construction on their apartments.  This sounds great for a townhouse, but less plausible for the rigid cooperatives who only want buyers to be leveraged at 50-75% financing, even if by doing renovation they are increasing the value of their homes.  Frustrating, no doubt.  I would think this opens the door for buyers who want to renovate older resale condominiums.  We shall see about that.

In the end, there hasn’t been enough clarity on what has caused the slowdown, but if buyers feel pricing is flat-to-down, and mortgage rates aren’t going anywhere, then a natural reaction would be to head for the beach and to delay, I suppose.  It may be as simple as psychology.  At the same time, opportunities abound.


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