What NYC Real Estate Pros Think of Interest Rate Cuts in 2024 – The Real Deal

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Rarely has so little change resulted in so much real estate exuberance.

Real estate professionals celebrated yesterday after Federal policymakers announced that interest rates would not rise further this year and that interest rates are expected to fall next year.


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“My reaction is happy, happy, happy,” said Steven James, CEO of Berkshire Hathaway Home Services. “It’s what we’ve all been looking for.” Practically all corners of the housing market have suffered under the yoke of rising interest rates, a policy meant to stem a rise in price inflation.  

“After picking up somewhat over the summer, activity in the housing sector has flattened out and remains well below levels of a year ago,” Federal Reserve chairman Jerome Powell said late Thursday, “largely reflecting higher mortgage rates.”  

After Powell’s announcement, the average thirty-year mortgage fell below 7 percent, according to a survey of the mortgage market by Freddie Mac, dropping from a 23-year high of nearly 8 percent in October. 

“Additional rate hikes no longer appear to be part of the conversation,” chief economist of the Mortgage Bankers Association, Mike Fratantoni, said in a statement. “It is all about the pace of cuts from here.” The National Association of Realtors forecasts that mortgage interest rates will average 6.3 percent in 2024.

“Anything under six [percent] will really make a huge difference” toward coaxing homeowners off the sidelines, said James, after many locked in low mortgage rates during the pandemic. To the extent that falling mortgage rates stoke buyer demand without getting more owners to list their homes, “I would expect prices to rise a little,” said James.

“You want potential sellers to feel comfortable putting their properties on the market,” he added. 

However, doubt remains over how much additional inventory a rate reduction in 2024 will produce. 

“I don’t think inventory is going to come in fast enough to flood the market,” said housing market analyst Jonathan Miller.

Brown Harris Stevens CEO Bess Freedman echoed Miller, saying she was “skeptical” about the impact of rate cuts, but added she felt “cautiously optimistic” that “2024 will be a better year than 2023” — still with “limited supply.”

The freeze in interest rates, and anticipation of cuts next year, has followed a steady decline in the growth of inflation. However, the “soft landing” that the Federal Reserve wants — a new business cycle with lower rates minus an accompanying recession — will not be automatic.

Slower inflation coupled with interest rates at their current level would amount to a real increase in the cost of borrowing. In that sense, the Fed’s decision to cut rates is expected. Knowing when and by how much to cut rates may make all the difference. 

“One fairly likely situation,” said Andrew Steiker-Epstein, brokerage president at Charney Companies, “is that rates come down because the economy is struggling.”

“The view that lower rates mean more people will buy more real estate is too simplified,” said Steiker-Epstein. “Lower rates could also mean a weaker economy and falling prices.” He added that “if rates come down next year, it will be beneficial for [developers who are servicing] senior debt and construction loans.”

The effect of rate cuts on New York’s luxury housing market, where all-cash buyers have brushed aside costlier mortgage rates, may be muted. 

“If we avoid a recession and actually nail a soft landing in the economy, I anticipate you will see wealthy buyers buying in greater numbers,” said Compass agent Ian Slater. “However, many still have net worths much lower than where they sat in 2021, which continues to affect their sentiment and purchasing power.”

Economists still anticipate that rate cuts would benefit real estate as a whole.

“Let’s also hope the lower mortgage interest rates translate into stronger home builder activity, as inventory will be needed as buyers move from the sidelines,” said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors. 

“We expect that this path for monetary policy should support further declines in mortgage rates just in time for the spring housing market,” said Fratantoni of the Mortgage Bankers Association. “We are forecasting modest growth in new and existing home sales in 2024, supporting growth in purchase originations, following an extraordinarily slow 2023.”

“I’d said quite a bit that ‘23 was going to be the year of disappointment,” summarized Miller. “But [2024] is the year of incremental change.”

The Dow Jones Industrial Average rose to an all-time high of 37,000 points at the close of trading on Thursday, an increase of nearly two percent since Powell’s remarks. Vanguard’s real estate index fund meanwhile rose more than six percent to its highest level since February. 

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