The fourth quarter of each year isn’t typically a record-breaking time for New York City’s housing market. With the holiday shopping season in full force during the last two months of the year, it seems as if many are more concerned with buying presents, not houses. However, New York City’s real estate market had an impressive finish in 2013, with sales in the condo and co-op market setting a “fourth quarter record high,” says the World Property Channel.
As a whole, property sales were up in all markets last year. Year-to-date sales in Manhattan climbed to 12,735 in 2013 — an increase of 21.2 percent from 2012, says the Douglas Elliman Real Estate Report.
New York City’s Property Sales Might Slow as Rates Rise
Year-end stats often provide a sampling of what’s to come in the new year. But with higher mortgage rates on the horizon, “2014 is going to be the year of slow and steady,” said Dottie Herman, president and CEO of Douglas Elliman.
The Mortgage Bankers Association predicts that interest rates will rise to 5% by the end of 2014, and average 5.3% by the end of 2015.
Currently, borrowers in New York City can snag an average mortgage rate of 4.19%, which is a little higher than the national average of 4.17%, according to Zillow.com.
With mortgage rates projected to increase a full percentage point within the next two years, there’s a strong chance that New York City’s housing market will start to lose some of its steam.
Interest rates in the city — and nationally — spiked in June 2013. It’s conceivable that this increase played a part in record stats during the fourth quarter of 2013 and “brought a flood of people who were on the fence into the market,” according to real estate appraiser and market analyst Jonathan Miller.
But as mortgage rates slowly climb, many lenders are likely to see a decline in the number of mortgage refinancing applications; and purchasing power might decline for some buyers, forcing many to postpone buying a home. And since properties become less affordable as interest rates increase, there might be a lower demand for housing through this year.
For New York City’s housing market, this could mean higher inventory and slower price gains through 2014.