Will the Ice Thaw this Fall?

With all the talk about the Fed potentially lowering interest rates this fall, the Manhattan real estate market (and the Brooklyn market, too) has been abuzz with hope. Since the small adjustment in mortgage rates around the middle of August, experts have been wondering what could happen if full-fledged prime rate decreases start rolling out at the Fed's next meeting on Sept. 17. Did the slight downtick in interest rates translate to actual sales activity last month? And will the thawing of mortgage interest rates produce an influx of buyer interest in the New York City real estate market soon? Let's dive in.

First, let's look at how the market is really doing in terms of weekly signed contracts. For most of the spring and summer, the contract rate was hovering around 200 properties weekly. This rate stayed steady through the hottest part of the spring market and the lowest and slowest weeks of the summer market. Slow and steady was and is the motto of the 2024 real estate market. For example, back in spring — typically the hottest time of the entire year with the highest volume of listings going into contract — there was only a max of 235 contracts signed per week. Compare that to the 350 to 400 units that would usually go into contract in the strongest weeks of a normal year's spring market. But not this year. Because of the under-performing spring period, many in the industry thought that activity would get worse and worse throughout the summer. However, buyers continued to put property into contract at that 200 apartments a week rate. Slow and steady. And even in the last week of August, considered one of the slower months of the year, buyers still put close to 200 apartments under contract yet again!

Did we see an increase in buyer activity towards the end of August because of interest rates? If so, will that continue to grow into a late "spring market" in September? Well, if the Fed does decide to cut rates this month, I can tell you firsthand — and in concert with what most other salespeople, brokers and mortgage lenders are feeling — that there is a truly massive amount of pent-up buyer demand in the marketplace. Those buyers are simply longing for the days of interest rates that start with the number 5. So it stands to reason that they would snap back into the market like a rubber band and start taking property off the market at a higher clip than 200 listings per week!

If that happens, the next question is always, how will that affect pricing? It's my belief that we need the transaction rate, generally called the liquidity rate, to pick up before we can have any conversation around raising sale prices or asking prices. If we can get a nice month or two of stronger transaction rates, meaning how much property goes into contract on a weekly basis and how quickly, and we push through winter and into next spring with those above-average weekly in-contract numbers, I could seriously see prices starting to come back in 2025.

Meanwhile, we wait and see if the Fed will help the thawing of the market paralysis to get buyers out there signing contracts this September and October, before the election. With current forecasters anticipating three Fed rate cuts by the end of the year, we are all very hopeful that they will!