In many ways, we find it quite remarkable that volume has been as robust as it has over the last few years considering that credit markets have been so tight. Since the 2008 downturn, in fact, there has been little to no loosening of lending standards, shutting out many would-be owners from the party. It’s not surprising, therefore, that over half of all purchases over the last several years have been made with all cash. The city never ceases to amaze us in terms of its sheer amount of wealth and cash available. We often hear buyers exclaim: “where does all this money come from?” (Confession: we often ask ourselves the same question.)
We believe that, on the financing front, 2016 will bring much of the same, with perhaps only a tinge of loosening, as banks look to make up potentially lost volume driven by higher interest rates. This will benefit savers who have been diligent about stocking away towards a typical 20% down-payment. This tightness will also serve to decrease the chances of another real estate bubble forming from loose lending standards allowing those who can’t afford it to buy a home. That said, tight credit markets will continue to represent a decent barrier of entry to first-time home buyers seeking a slice of the Apple. Therefore, it will continue to be very important to diligently create a stellar buyer narrative in order to best compete with non-contingent or all-cash offers.
Closely linked to financing is the interest rate picture. On the heels of the Fed’s December rate hike, many are wondering how many more are on the horizon in 2016. Experts seem to oscillate between predicting two to four increases over the course of the year, reaching a final rate of 0.75% to 1.25%. Wherever we land, our prediction is that it will not impact overall demand in NYC, how much apartment one can buy for a said budget.