The fundamentals of Manhattan’s residential marketplace that have characterized most of 2013 are expected to continue into the fourth quarter with some notable variations. Demand will remain strong; inventory will improve somewhat; prices will hold steady; interest rates are trending higher however.


Mortgage rates have been increasing since May when 30 year fixed rates were at a historic low of 3.35%. According to Freddie Mac’s Primary Mortgage Market Survey, its weekly analysis of lenders, rates have been inching up steadily and by September 5th, they were at 4.57%. Still low if you can remember the early 80’s when interest rates were 18%, but a dramatic 36% increase in just four months nonetheless. For the buyers in contract, this time period meant scurrying to lock-in lower rates before they headed even higher; for those purchasers who were out looking, it meant a more frenzied search for property, attending crowded open houses only to be beat out by all cash buyers. If there is movement in the next quarter in rates, it’s more likely they will creep up or remain flat than go down, so the pressure will be on buyers not to wait but to buy now to take advantage of still low rates while they can. A one percentage point difference detracts significantly from purchasing power and negatively impacts a property’s affordability.


That rising rates have led to a decrease in refinancing is no surprise. That they have led to an increase in all cash transactions is striking. According to a mid August report by Goldman Sachs, the analysts estimate that over 50% of 2012-2013 home purchases were made by buyers paying cash, compared to just 10% in 2005. And while they acknowledge that the exact level of their estimate may be “inaccurate,” they emphasize an undeniable current trend of cash purchases driven largely by investors of distressed properties and by the challenges that borrowers are facing in a tightened and highly regulated lending environment.


 Another current lending curiosity, reported by the Wall Street Journal last Thursday, is that jumbo loans are becoming less expensive than conventional conforming loans—an unprecedented circumstance according to experts. In New York, the limits for a non conforming jumbo loan are $625,500, and loans in this amount or higher can cost from .5 to as much as 1.8 points higher than those loans below the $625,500 threshold of government backed Freddie Mae and Freddie Macs products. Oddly enough, at least for the moment as of this writing, some borrowers can get a better rate by borrowing more. Lower rates for jumbo loans are available to those with stellar credit, high assets and low debt to income ratios.


This Fall, we’re expecting the market to be busy with a burst of energy out of September’s unofficial starting gate. There’s lots of pent up demand as buying activity was halted temporarily for at least four reasons: 1) a fundamental lack of inventory; 2) a wait and see attitude in the face of rising interest rates; 3) an August vacation lull; and 4) the Jewish calendar with Rosh Hashanah following 2 days after Labor Day causing many schools to postpone opening for a week. A delayed start to Fall’s selling season serves to pique pent-up demand and is bound to quicken the pace of decision making in the 4th quarter.


But product remains in short supply. In Manhattan, according to, there are 3,937 active listings on the market this morning—an astonishing drop of 59% from the highs of four and a half years ago. Similarly, a tight inventory characterizes most residential markets across the U.S. Last month, the National Association of Realtors launched a consumer advertising campaign urging sellers to list their homes. With a “don’t sit on the sidelines” theme, the commercial depicts images of life situations that cause us to hesitate—a young boy falters as he looks for a partner at a school dance; a toddler pauses before jumping into a pool to her father’s outstretched hands. Addressing homeowners directly, the TV ad highlights a heated housing market and announces: “There’s a shortage of homes for sale….  If you’ve been thinking about selling your home, don’t hesitate.” 


The Manhattan housing market is vibrant. If you’re a buyer or seller today, there are tangible reasons to take deliberate action now.