With interest rate cuts on the horizon, NYC brokers expect a busier fall sales market
- Sellers are encouraged by sliding mortgage rates—they fell to the lowest level in more than a year
- Buyers are searching for deals now and hoping 'rates will be even lower by the time they close'
The model unit at Quay Tower, a luxury waterfront condominium in Brooklyn Heights. The building recently had its first financing deal "in a very long time.”
Brokers are predicting a busier-than-usual New York City sales market this fall—one that will make up for a slower spring selling season.
Fall traditionally takes a backseat to spring, when there are more listings on the market. But autumn is when sellers cut prices and buyers have less competition. And this year, there are signs that conditions are improving for both buyers and sellers: Mortgage rates slipped to the lowest level in more than a year last week—ahead of expected interest rate cuts—factors which appear to be encouraging sellers to list their properties.
New listings increased just over 3 percent in July compared to last year, said Kenny Lee, an economist at StreetEasy, who recently authored a report on the best time of year to buy in NYC. This “is a strong sign that rate lock is losing its grip on the city’s sellers,” Lee said.
“I think it’s likely that more sellers will join the market as mortgage rates continue to decline, just as more buyers will join the market,” he said, pointing out that sellers often are buyers as well.
Lee’s report found that the share of listings with price cuts is slightly elevated this year compared to recent years.
“Right now, we’re in a period where sellers are coming to terms with the fact that the market isn’t where it was in 2021-2022. Elevated mortgage rates and asking prices have kept many buyers on the sidelines, and more sellers have been cutting prices to attract buyers as a result,” he said.
Brick queried NYC brokers and other real estate professionals to see what they had to say about the upcoming fall market. Here’s what they told us.
Making up for a lost spring
There was a burst of Manhattan condo and co-op sales in the spring, but still high mortgage rates meant closings were lower than pre-Covid rates. The fall will see more robust levels of activity, brokers told Brick.
“I expect the fall sales market of 2024 to be more like the spring market should have been,” said Douglas Wagner, director of brokerage services at BOND New York.
A more favorable market for buyers can only occur with more listings, he said. And if the Fed starts cutting rates—a quarter point rate cut is expected in September.
“We are hearing that sellers who have been waiting are finally ready to list this fall in order to be a part of what is expected to be a rush, once it's clear that the Fed has cut the benchmark lending rate, 10-year Treasury yields are holding at or just below 4 percent, and the fluctuations in the stock market level off,” he said.
Falling rates have woken up buyers, said Sean Adu-Gyamfi, a broker at Coldwell Banker Warburg.
“We’ve had a steady two weeks of decreasing [mortgage rates] and this does not include the expected rate cuts from the Fed come September. The rates dropping are the clearest indicator of an active market, and I’ve already had conversations from buyers who have said, ‘I’m waiting for rates to drop,’” Adu-Gyamfi said.
Which buyers are coming back? What do they want?
High mortgage rates generally impact buyers at entry pricepoints in NYC. Scott Harris, a broker at Brown Harris Stevens, said buyers in the $1 to $3 million market have been on the sidelines. (Other brokers said it was the under $5 million market.)
"But that is changing as mortgages under 6 percent are being secured. At 5.5 percent, the lights come on,” he said—and sales volume picks up.
There’s also been a recent increase in cash buyers targeting prime properties, said Abraham Sarway, a broker at Douglas Elliman, because they anticipate greater competition in the future as mortgage rates decline.
“There is a continued preference for renovated, premium properties over those requiring work or in less desirable locations,” he added.
Borrowers start shopping again
Debra Shultz, vice president of lending at CrossCountry Mortgage, pointed out the fall market in 2023 was “incredibly slow” with rates in the mid-7 percent range.
This fall will “be a totally different market,” she said, a result of the first significant rate drop in the past two years.
“I’m already inundated with pre-approvals for buyers paying attention to the news. Rates have started to drop ahead of a Fed rate cut. They’re ready. It’s been two years of dilly-dallying,” she said.
She said buyers are going to sign contracts but hold off on locking their rate until after the Fed meeting in September, when they are expected to cut interest rates.
“My team and I will likely be working well before and after hours to keep up with demand. I’ll be doing pre-approvals in my sleep,” she said.
It is always hard to time the market, but Charlie Attias, a broker at Compass, said buyers are searching for deals now and hoping “that rates will be even lower by the time they close on their property,” he said.
Banks often factor in future reductions, explained Ariel Tirosh, a broker at Douglas Elliman. He said a buyer he worked with was able to secure a five-year ARM for 5.75 percent, “a rate we haven’t seen in a while.”
Pushed out of the rental market
Many buyers have been parked in rentals for close to two years, waiting for sales market conditions to improve. But with NYC rents near record highs, many buyers are expected to make their move instead of renewing leases. The average rent per square foot for Manhattan apartments leased in July was the second-highest on record, according to the Elliman Report.
Sky-high rents “will incentivize buyers to get back into the market,” said Christine Miller Martin, an agent at Compass.
Tirosh of Douglas Elliman handles sales for Monogram New York at 135 East 47th St., a new condo building slated to begin closings this fall.
“We are starting to see more primary home buyers, who are weary of high rental rates, emerge to check out the current inventory,” Tirosh said.
Financing a luxury condo deal
Jim Hayes, an agent at SERHANT, leads sales at Quay Tower, a luxury waterfront condominium in Brooklyn Heights. The building has seen record sales in Brooklyn, including a $20.3 million penthouse sale, the most expensive condo sold in the borough.
For Hayes, the market has already “picked up significantly, which also has to do with rates starting to fall. We recently had our first financing deal—in a very long time—at Quay Tower.”
All eyes on the election
Brokers are paying attention to mortgage rates, inventory levels, pricing trends, days on market and inflation to divine which way they think the market is heading.
And this year is a presidential election year, which Maria Avellaneda, a broker at Keller Williams NYC, said, “adds an additional factor for speculation,” she said.
Many of these indicators may be flashing green for New Yorkers, but Lisa K. Lippman, a broker at Brown Harris Stevens, cautioned sellers not to jump the gun.
"Interest rates coming down, inflation tapering, and a shift in perception surrounding the upcoming elections is giving us all the feeling that the economy is on the upswing. The fall market will be better than last year, but that is not to say it will be gangbusters,” Lippman said.
She noted that “sellers tend to adjust too quickly to good news by rapidly increasing their prices.”
The market is still sensitive to price. “If smart sellers continue to be reasonable with pricing and listen to offers, we will have a good fall, and potentially a really good spring," she added.
A couple contrary opinions
One counterpoint comes from Noah Rosenblatt, co-founder of UrbanDigs, a real estate data analytics company, who said he expects the NYC sales market will continue to see a “saturation of uncertainty.”
He predicted lower-than-usual demand and listings this fall because of interest rate volatility, the election, and overall investor uncertainty.
The election is giving some sellers pause, said Devin Hugh Leahy, a broker at Douglas Elliman, who noted that “as of last week, inventory is unchanged in the luxury market and down 1 percent in the [non-luxury] market.”
“We do not expect the standard post-Labor Day supply increase, as many prospective sellers will likely opt to hold off on listing their properties until after the election with spring of 2025 a likely beneficiary of a supply surge,” Leahy said.
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