Coronavirus impact on Manhattan property
Posted by Wei Min Tan on March 12, 2020
The Coronavirus (COVID-19) has impacted the Manhattan property market, although at a negligible level when compared to how it impacted the stock market. For buyers, mortgage rates are at 50-year lows. Sellers are holding off on listing their property amid concerns about dampened prices and exposure to large groups coming to their apartment for open houses.
Fed cutting rate to near zero
The stock market experienced massive declines while investors fled to the bond markets which lowered bond yields. The 10-year Treasury bond yield fell to less than 0.70% yesterday. For context, it was at 2.621% a year ago. Mortgage rates are most correlated with the yield of the 10-year Treasury. As the 10-year Treasury yield goes down, so do mortgage rates.
The Federal Reserve Bank announced plans to further cut interest rates to near zero in a move to help the U.S. through this global pandemic. The current fed funds rate is at a range of between 1% to 1.25%. The Fed may cut the rate by another 1 percentage point next week.
Mortgage rates at 50-year low
Mortgage rates were at 3.29% last week, a 50-year low since Freddie Mac began tracking in 1971. It has increased to 3.36% today as lenders deliberately raised rate to stave off the surge in application and refinancing volume. Mortgage applications were up 192 percent while refinancings up 79 percent compared to a year ago.
Last week, I spoke to a mortgage broker experienced with foreigner mortgages. One day the rate was 4.625%. The next day it went down 50 bps to 4.125 percent! That’s a dramatic drop. For a $1 million loan, the 50 bps decrease in rate translates into a monthly payment reduction of $295.
For buyers, this is the time for the cheapest debt in history. The challenge is to be able to close in time per the date on the signed contract because banks are heavily understaffed to handle the volume.
Read about Foreign Buyer Guide to Manhattan property
Sellers holding off on listing property, concerns about open houses
According to Jonathan Miller of Miller Samuel, March is typically the month sellers put apartments on the market. Historically, number of listings in March increase by 7 to 10 percent. But this year, the increase has been only 2 percent. This is due to sellers’ concern that the coronavirus may depress their property’s price. Perhaps more importantly, sellers are trying to avoid having large groups of strangers into their property touching this and that during open houses.
Sellers with a choice are waiting for the coronavirus scare to subside. This differentiates those who have flexibility in selling and those who really want to sell.
Manhattan’s real estate activity
Every Sunday I view between 5 to 8 apartments either with a client or by myself to keep abreast with the inventory. And during the weekdays, another 5 privately scheduled viewings. Activity has been quite normal. Traffic at open houses have picked up since last month. One apartment I saw last week had an accepted offer two days later the first open house. Buyers are definitely coming into the market now.
The main noticeable difference with the coronavirus is that people are doing fist bumps or elbow touches instead of the typical handshake. Seller’s agents are offering hand sanitizers. I have yet to see anyone wearing a face mask to an apartment viewing.
In summary, a lot of people are taking advantage of the lowest mortgage rates in history whether it’s through getting a new mortgage or refinancing. The volume of listings available for sale is suppressed. In terms of activity at viewings and open houses, it still seems very normal. Compared to a month ago, traffic at viewings picked up a lot.
Read about Manhattan property price appreciation trend
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