New York City Real Estate | NYC, NYNew York City Real Estate | NYC, NYNew York City Real Estate | NYC, NYNew York City Real Estate | NYC, NY
  • ABOUT
    • ABOUT SCOTT
    • ABOUT THE TEAM
    • PRESS
  • BUYERS
  • SELLERS
  • VIDEOS
  • LISTINGS
  • JOIN OUR TEAM
  • BLOG
  • CONTACT
  • CALL SCOTT NOW

The Impact of Strict Lending Standards on the NYC Market

    Home Newsletter The Impact of Strict Lending Standards on the NYC Market
    NextPrevious

    The Impact of Strict Lending Standards on the NYC Market

    By admin | Newsletter | Comments are Closed | May 19, 2014 | 0

    Market data has not changed much in the last couple of months. New development selling out in record time and

    an utter lack of property, especially at the low end of the market.

    Thoughts about what is causing the continued lack of inventory, along with what levers might move the market to a healthier equilibrium.

    I looked back to see that I covered lending as a source of stress on the inventory about a year ago.

    One take, the popular and simplistic Economics 101 view, was that low rates were driving buyers into the market, both for purchasing and refinancing, and inventory suffered as a result.
    The slightly different take on lending’s impact considers its impact on limiting inventory, and not because of demand.

    Rather, because of pressures facing sellers, the inventory has suffered.

    That is, sellers are finding that underwriting standards are keeping them from either upsizing OR downsizing.

    They qualify for neither.
    Jonathan Miller, who maintains a great blog, today put out some data about the lower 90% of the market – the non-luxury market is still accelerating.

    He was theorizing the above: that strict underwriting is freezing new inventory more than anything else.

    And that, more than anything, is creating this appreciation acceleration.
    New development is a separate issue because no sub-luxury market product is being built.

    The luxury market, then, is its own subset, and my view is that there

    remains some theoretical limit to the astronomical push of prices in the top 10, where

    the pace of sales already appears to be slowing a bit.

    Buyers squeezing into an ever-shrinking box for underwriting.


    90% of the cooperative and condominium market inventory, then, is limited by those sellers who are hyper-qualified and don’t need to sell; or who squeeze into an ever-shrinking underwriting box, and can hold out at these high prices; or who are moving away (or dying, or getting divorced).

    You can read about

    the time when lending standards were tightened in 2010, which seems to have coincided with the run-up on pricing here, actually.

    Last week the WSJ reported that Fannie Mae and Freddie Mac are again loosening standards.

    The NYC market has its own built-in tight standards on who may purchase, and downpayment levels likely will never drop below 20% here again.

    In nearly every market in the United States, inventory levels have shrunk.

    My view is that everything could line up and hit at the same time:
    1) Increasing Rates
    2) Loosening lending standards
    3) Growing secondary private market for loans as rates increase
    4) Seller awareness that their homes have really appreciated, and a desire to capture those gains

    The question is whether tax structures will become onerous to the point that people will overcome the rest and sell anyway.

    Another major

    mitigating factor on pricing, then, is the lack of new development in Manhattan and Brooklyn to

    increase inventory.

    Cooperatives will see their share of total sales continue to grow along with any inventory increase.

    This is just a different lens to view why prices may flatten a touch.

    The good news is that rising rates should indicate a strengthening economy.

    Hopefully they’ll find a Goldilocks level of underwriting standards (i.e. Just Right), but don’t count on it.

    The pendulum probably has to swing the other way.
     

    fannie mae, manhattan inventory, Mortgage Rates, mortgage underwriting, new development, property inventory

    NextPrevious

    Recent Blog Posts

    • (VIDEO) Celebrating 150 Years In Residential Real Estate- And my 20th Anniversary, too. January 31, 2023
    • How to Make An Extra $1mm on the Sale of Your Townhouse January 30, 2023
    • What’s Going To Happen To All The Office Space In NYC? January 30, 2023
    • NYC, Manhattan, and The US: A Reversion To The Mean January 30, 2023
    • The Best Lead Measure in The NYC Housing Market Right Now January 30, 2023
    • How To Think About Mortgage Rates Right Now January 30, 2023
    • Are You In, or Are You Out Of New York City? The End Of Ambivalence. December 22, 2022
    • Mortgage Math- How To Spend LESS on Your Mortgage Right Now – What No One Is Telling You December 22, 2022
    • Selling To An Insider Could Cost You $150,000 December 22, 2022
    • The Unintended Consequences Of Higher Loan Limits on “Conforming Loans” November 30, 2022

    Archives

    Call us: (646) 400-0769
    Email us: sharris@bhsusa.com
    Visit us: Brown Harris Stevens
    1926 Broadway
    New York NY 10023

    © 2023 The Harris Residential Team. All rights reserved.
    • About Scott Harris
    • About the Team
    • Press
    • Buyers
    • Sellers
    • Videos
    • Listings
    • Blog
    • Contact
    • Call Scott Now
    • Brown Harris Stevens Fair Housing Policy
    • ABOUT
      • ABOUT SCOTT
      • ABOUT THE TEAM
      • PRESS
    • BUYERS
    • SELLERS
    • VIDEOS
    • LISTINGS
    • JOIN OUR TEAM
    • BLOG
    • CONTACT
    • CALL SCOTT NOW
    New York City Real Estate | NYC, NY