With mortgage rates still high, many prospective homebuyers are waiting on the sidelines until rates come down. The impact of these higher rates is evident in the housing market data, as housing starts fell 14.7% in March from February, marking a 4.3% year-over-year decline.
Douglas Elliman Licensed Real Estate Salesperson Timothy Malone and Compass NYC Real Estate Broker Mickey Conlon joins Wealth! to discuss the current state of the housing market.
Malone explains that with mortgage rates so high, the current buyers in the market are those who "need to buy right now," while everyone else is waiting on the sidelines. He advised buyers to "negotiate the sales price," as the sellers who "need to sell right now are very negotiable." However, Malone cautions against waiting, as rates drop and demand increases, it will become more challenging to find a home.
Conlon acknowledges the pent-up demand in the market, noting that buyers will eventually make moves due to life changes or financial pressures. He observes that buyers have slowly started returning to the market, buoyed by the prospect of the Federal Reserve's proposed rate cuts, which "has helped to get us over the hump" of housing market stagnation. However, Conlon warns that the possibility of no rate cuts "is real." He emphasizes that while current rates are not historically bad for the housing market, buyers have become "drunk" on the low-rate scenario.
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- As new home construction fell 14.7 during the-- 14.7%, excuse me, during the month of March from the month prior, this is the biggest decline in four years, according to the US Census Bureau. Now, that's not good news for homebuyers who are dealing with already low inventory and mortgage applications in March. Although up from a year ago, it saw its slowest annual growth rate since September 2023, showing homebuyers remain affected by high mortgage rates.
So what are some of the best practices as we enter into this spring home buying season? We've got some tips and tricks from Tim Malone, who is the Douglas Elliman licensed real estate salesperson. Also with us, Mickey Conlon, who is the compass New York City real estate broker. Great to have you both here with us today.
First and foremost here, you hear statistics like this and really look across the market here. Tim, I want to go to you first. What are you hearing from prospective home buyers right now and how they're trying to combat some of the mortgage rates that are in the market right now?
TIMOTHY MALONE: Thanks, Brett. It's really interesting. And I think you have to break it down by price point because we-- I just came out of a sales meeting, and that $1 million to $3 million buyer, which is our bread and butter here in Manhattan, they are really impacted by these mortgage rates. In the last couple of weeks, they've been creeping up.
And what I'm finding personally is the buyer is the buyers that need to buy right now. Those are the deaths, the marriages, the births. Those are the people that are really in the market. Everyone else is waiting on the sidelines.
- Mickey, what are you seeing in buyer confidence right now?
MICKEY CONLON: I agree with Tim 100%. The pent up demand can only remain pent up for so long. So if you're carrying-- if you're an empty nester or carrying a big place, and you need to downsize the financial burden of carrying that place, eventually, it becomes untenable. And if you're bursting out of a one bedroom, and you have a kid or two on the way, you need to make that move.
But psychologically, we're seeing buyers have come back to the market since the Fed announced its proposed rate cuts. And while those rate cuts have not really come to fruition in a meaningful way, the promise of those has helped to get us over the hump of the last couple of years.
- Mickey, just to follow up on that real quickly, I mean, we've seen a lot of economists, those that we've spoken here with on Yahoo Finance talk about the potential higher for longer and no-cuts scenario that we may see during 2024. What is in play at that point if we didn't see any cuts, and then how does that further impact what this spring buying and selling season looks like even going into the later half of this year, as well?
MICKEY CONLON: Yeah. So the possibility of no rate cuts is real. But historically, if we look back, the rates we're dealing with now are not terrible. We've been drunk on these very low rates for the better part of 15 years. And I remember years ago, back in 2009, 2010, telling buyers you'd better buy quickly. These low rates aren't going to be around forever.
And then it seemed like they were going to be around forever, and we were like "Chicken Little," and, you know, declaring that the sky was falling. But people will move on. You can't wait forever if you need a new home.
- So Tim, for those who can't wait forever, what are some tips that they can put into effect here and actively take to the table when they're negotiating or looking at buying real estate right now?
TIMOTHY MALONE: I think negotiating is the key word here, and that's what we're telling our buyers is negotiate the sales price because the sellers that need to sell right now are very negotiable, and you can always refinance down the road. But get that negotiation as best you can and find your apartment.
And that's the other thing, don't wait because the demand is only going to increase as these rates drop. Right now is a tremendous buying opportunity here in Manhattan.
- Are you seeing any flexibility, Tim, on pricing as those negotiations move forward?
TIMOTHY MALONE: Again, it depends on what neighborhood we're talking and what price point. But for the most part, most people on the market right now are negotiable, yes.
