Tag Archives: real estate

Technology

Manhattan apartment discounts may be ending soon as sales soar 73%

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A man enters a building with rental apartments available on August 19, 2020 in New York City.

Eduardo MunozAlvarez | VIEW press | Corbis News | Getty Images

Sales contracts in Manhattan for residential real estate soared by 73% in February, and brokers say the days of big price cuts and deals in the city may be ending.

There were more than 1,110 sales contracts signed in February, up from 642 in 2019 and marking the third straight month of year-over-year gains, according to a report from Douglas Elliman and Miller Samuel.

After seeing historic declines in deal volume in 2020, as hundreds of thousands of people migrated from the city to the suburbs and other states, Manhattan’s real estate market is bouncing back more quickly than many brokers and analysts expected, thanks largely to the Covid vaccine progress and price cuts.

The first two months of 2021 saw a total of 2,472 contracts signed — the highest levels since the Manhattan market peak in 2015, according to Garrett Derderian, director of market intelligence for Serhant, a real estate brokerage firm. Sales contracts in 2021 so far have topped $5 billion.

“This is a remarkable recovery from 2020, and a trend we began to see emerge from the time Biden was elected in November to the announcement of the first viable vaccines for Covid,” Derderian said.

Brokers and analysts say much of the activity was driven by lower sales prices, which have fallen an average about 10% in Manhattan, according to Jonathan Miller, CEO of Miller Samuel. Many condo buildings were forced to cut prices by 20% or more and resales of some luxury apartments on “Billionaire’s Row” in midtown Manhattan have been selling at less than half of their peak prices in 2015.

But now, with rising demand from buyers returning to the city, price cuts and deals could be ending or fading soon, brokers say. The inventory of unsold apartments, which had ballooned to more than 9,400 at its peak last fall, has shrunk by 20% to about 7,500, which is close to the historical average, according to Miller.

“It looks like it is going to be a short window” for price cuts, said Steven James, president and chief executive officer of Douglas Elliman’s New York City brokerage.

Of course, there is still a large supply of “shadow inventory” — or apartments that are empty but unlisted —and sellers who need to sell quickly will still need to discount, analysts say.

Potential tax increases in New York could also prolong any recovery, along with remote work policies that allow workers to live outside the city. Many say it could still take years for Manhattan prices and deal volume to return to pre-pandemic levels.

Yet analysts and even the most bullish brokers say they are surprised with how quickly Manhattan real estate is bouncing back after last year’s record decline. Brokers say the buyers are a mix of three categories: those who left the city and are returning, younger buyers who were priced out of the market for years and can now buy thanks to price cuts and low mortgage rates, and new buyers who sold their homes in the suburbs for high prices and want to try living in the city.

Much of the growth is being driven by the high end, with contracts signed for listings above $10 million quadrupling. Yet even studio apartments and one-bedrooms are seeing strong gains from younger buyers.

“The bigger narrative is the inbound migration to Manhattan,” Miller said. “I think the youth renaissance we are going to see in Manhattan is a big part of the story.”

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Business

30-Year Mortgage Rate Tops 3% for First Time Since July

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Americans who purchased new homes or refinanced their mortgages over the past few months may have done so at just the right moment.

The average rate on a 30-year fixed-rate mortgage rose to 3.02%, mortgage-finance giant

Freddie Mac

said Thursday. It is the first time the rate on America’s most popular home loan has risen above 3% since July and the fifth consecutive week it has increased or held steady.

Mortgage rates fell throughout most of 2020 after the Covid-19 pandemic ravaged the economy. That helped power the biggest boom in mortgage lending since before the financial crisis, fueled by refinancings. When rates hit 2.98% in July, it was their first time under the 3% mark in about 50 years of record-keeping.

The recent upward moves paint a clear contrast: More vaccinations in the U.S. and recent progress on the latest coronavirus relief bill have brightened investors’ outlook on the economy, a key variable in determining borrowing rates.

Mortgage rates tend to move in the same direction as the yield on the 10-year Treasury, which has been rising. Treasury yields rise when investors feel confident enough in the economy to forgo safe-haven assets such as bonds for riskier ones including stocks. Last week, the yield hit its highest level in a year.

Freddie Mac chief economist

Sam Khater

said he expects a strong sales season, partly because he thinks “the uptrend in rates from here will be more muted than the past few weeks.” The Federal Reserve has said it would maintain ultralow interest rates until the economy improves.

“The Fed has seen the carnage from the last crisis, and they don’t want to pre-empt the recovery by starting to raise rates and choking off that nascent recovery,” Mr. Khater said.

However, rising rates have started to weigh on home purchase and refinance applications in recent weeks.

The U.S. mortgage market involves some key players that play important roles in the process. Here’s what investors should understand and what risks they take when investing in the industry. WSJ’s Telis Demos explains. Photo: Getty Images/Martin Barraud

Higher mortgage rates could discourage some would-be buyers from trying to purchase a home during the key spring selling season, because higher interest rates translate into larger monthly payments. That could prompt people to search for a cheaper house or to put their homeownership goal on hold.

Even before the recent climb in rates, surging U.S. home prices had begun to outweigh the savings afforded by historically low borrowing rates. The typical monthly mortgage payment in the fourth quarter rose to $1,040 from $1,020 a year earlier even as mortgage rates declined, according to the National Association of Realtors.

Rising rates can also put the brakes on refinancings, which accounted for about 60% of mortgage originations in 2020, according to the Mortgage Bankers Association.

With a 30-year rate of 2.75%, about 18 million U.S. homeowners could reduce their monthly payments through a refinance, according to mortgage-data firm

Black Knight Inc.

When the rate rises to 3.25%, the pool of eligible homeowners shrinks to about 11 million.

Homeowners such as Lindsay Ellis of Charlotte, N.C., who closed on a refinance last month, may have locked in some of the lowest mortgage rates available for the foreseeable future.

Ms. Ellis cut the rate on her condo from about 4.6% to 2.9% through a refinance with

Rocket

Cos. She hasn’t decided where she’ll put the roughly $160 in monthly savings, but she plans to explore different investment options.

“I didn’t have to do a lot of the work to shop around and compare rates because the rate they gave me was great,” she said.

Ms. Ellis wouldn’t have qualified for a refinance when rates began falling last year because unemployment benefits kept her afloat for part of 2020. Ms. Ellis, a fitness director, was furloughed from her job last St. Patrick’s Day and couldn’t return until the fall. She began to consider the refinance shortly after.

Write to Orla McCaffrey at orla.mccaffrey@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Mortgage application demand stalls as interest rates surge

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Mortgage interest rates last week rose at the fastest pace in over a year, throwing cold water on already cooling demand.

Total mortgage application volume was essentially flat for the week, rising just 0.5% according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.23% from 3.08%, with points increasing to 0.48 from 0.46 (including the origination fee) for loans with a 20% down payment. The rate was 34 basis points lower one year ago, but that annual comparison has been shrinking steadily. Last fall, mortgage rates were 100 basis points lower compared with the year before.

“Mortgage rates jumped last week on market expectations of stronger economic growth and higher inflation,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The 30-year fixed-rate experienced its largest single-week increase in almost a year, reaching the highest [level] since July 2020.”

Applications to refinance a home loan, which are most sensitive to weekly rate moves, managed to eke out a 0.1% gain for the week and were just 7% higher than a year ago. By comparison, refinance volume in the middle of December was over 100% higher year over year.

The refinance share of mortgage activity decreased to 67.5% of total applications from 68.5% the previous week.

Mortgage applications to purchase a home increased 2% for the week and were just 1% higher than a year ago. Homebuyers are facing a pricey and lean housing market, as homebuilders struggle to meet demand, and potential sellers pull back. As mortgage rates rise, affordability will weaken further, but more first-time buyers appear to be venturing in.

“The housing market is entering the busy spring buying season with strong demand. Purchase applications increased, with a rise in government applications — likely first-time buyers — pulling down the average loan size for the first time in six weeks,” Kan said.

Mortgage rates did pull back a bit to start this week as the yield on the 10-year Treasury fell. Mortgage rates loosely follow that yield.

“In the past two decades there have been six months where mortgage rates rose at least 50 basis points.  February 2021 was one of them,” said Matthew Graham, COO of Mortgage News Daily. “In other words, it was a really bad month for rates — so bad, in fact, that it has increasingly made sense to look for some relief simply because things don’t tend to stay that bad for that long.”

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US

Biden extends protections for homeowners. What you need to know

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Historic row houses in Colombia Heights neighborhood of Washington DC, USA

amedved | iStock | Getty Images

Homeowners struggling amid the coronavirus pandemic received some welcome news on Tuesday, with the Biden administration announcing it will extend forbearance and foreclosure relief programs.

The White House said that the move will benefit the 2.7 million homeowners currently in Covid forbearance and extend the availability of forbearance options for around 11 million other government-backed mortgages nationwide.

“Since the crisis is going on much longer than anyone anticipated, it’s only appropriate to extend remedies that we know are working,” said Sarah Gerecke, an associate professor of planning at New York University. Many of those relief options were scheduled to expire next month.

Have questions about the new protections? Here are some answers.

Does my mortgage qualify for the new protections?

Federally backed mortgages, or about 70% of borrowers, are eligible for the additional forbearances.

If you have such a home loan, you can enroll in a forbearance until June 30, and potentially for six months after. If you have a mortgage from Fannie Mae or Freddie Mac, you can delay your payments for at least another three months.

“The easiest way to find out if you are eligible and to seek payment relief if you need it is to reach out to your lender,” said Greg McBride, chief financial analyst at Bankrate.com.

How do I request the forbearance?

Will I need to prove that I qualify for the forbearance?

Onerous paperwork requirements prevented many homeowners from getting relief during the 2008 crisis, McBride said.

Fortunately, during the pandemic, you only have to attest that you’ve suffered a financial hardship.

Do I have to do anything if I’m already in forbearance?

Yes. Your forbearance will not automatically renew.

“You must contact your lender and ask for it,” McBride said.

How long can I be in forbearance for?

Some people will be in forbearance for as long as 18 months, since the first stimulus package passed in March, the CARES Act, offered homeowners two 180-day relief periods, and now the Biden administration is granting them two additional three-month breaks.

How will my missed payments be calculated?

Fortunately, if you qualify for the forbearance, you don’t need to make up your payments in a lump sum at the end of the relief period. (Although if you’re one of the 30% of homeowners who don’t have a government-backed or guaranteed mortgage, you might.)

Instead, you can ask that your payments be tacked on to the end of your loan, McBride said.

For example, if you missed 12 months of payments, a 30-year mortgage would now take you 31 years to pay off.

What if I’m at risk of foreclosure?

You should be safe until at least the end of June.

“You will not be foreclosed on during the period of the moratorium unless you have vacated or abandoned your property,” said Sara Singhas, director of loan administration at the Mortgage Bankers Association.

I’m a renter. Does this offer me any protections?

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Business

Despite surging stocks and home prices, U.S. inflation won’t be a problem for some time

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When America’s amusement parks and baseball stadiums no longer must serve as COVID-19 mass vaccination sites, some investors believe that households pocketing pandemic financial aid from the government might start to splurge.

While a consumer splurge could initially boost the parts of the economy devastated by the pandemic, a bigger concern for investors is that a sustained spending spree also could cause prices for goods and services to rise dramatically, dent financial asset values, and ultimately raise the cost of living for everyone.

“I don’t think inflation is dead,” said Matt Stucky, equity portfolio manager at Northwestern Mutual Wealth Management Company. “The desire by key policy makers is to have it, and it’s the strongest it’s ever been. You will see rising inflation.”

Wall Street investors and analysts have become fixated in recent weeks on the potential for the Biden Administration’s planned $1.9 trillion fiscal stimulus package that targets relief to hard-hit households to cause inflation to spiral out of control.

Economists at Oxford Economics said on Friday they expect to see the “longest inflation stretch above 2% since before the financial crisis, but it’s unlikely to sustainably breach 3%.”

Severe inflation can hurt businesses by ratcheting up costs, pinching profits and causing stock prices to fall. The value of savings and bonds also can be chipped away by high inflation over time. 

Another worry among investors is that runaway inflation, which took hold in the late 1970s and pushed 30-year mortgage rates to near 18%, could force the Federal Reserve to taper its $120 billion per month bond purchase program or to raise its benchmark interest rate above the current 0% to 0.25% target sooner than expected and spook markets.

At the same time, it’s not far-fetched to argue that some financial assets already have been inflated by the Fed’s pedal-to-the-metal policy of low rates and an easy flow of credit, and might be due for some cooling off.

U.S. stocks, including the Dow Jones Industrial Average
DJIA,
+0.09%,
S&P 500 index
SPX,
+0.47%
and Nasdaq Composite
COMP,
+0.50%
closed on Friday at all-time highs, while debt-laden companies can now borrow in the corporate “junk” bond, or speculative-grade, market at record low rates of about 4%.

Read: Stock market stoked by stimulus hopes — what investors are counting on

In addition to rallying stocks and bonds, home prices in the U.S. also have gone through the roof during the pandemic, despite the U.S. still needing to recoup almost as many jobs from the COVID-19 crisis as during the worst of the global financial crisis in 2008.

This chart shows that jobs lost to the pandemic remain near to levels seen in the aftermath of that last crisis.

Job losses need to be tamed


LPL Research, Bureau of Labor Statistics

Fed Chairman Jerome Powell said Wednesday that he doesn’t expect a “large or sustained” outbreak of inflation, while also stressing that the central bank remains focused on recouping lost jobs during the pandemic, as the U.S. looks to makes serious headway in its vaccination program by late July. 

Treasury Secretary Janet Yellen on Friday reiterated a call on Friday that the time for more, big fiscal stimulus is now.

“Broadly, the guide is, does it cost me more to live a year from now than a year prior,” Jeff Klingelhofer, co-head of investments at Thornburg Investment Management, said about inflation in an interview with MarketWatch.

“I think what we need to watch is wage inflation,” he said, adding that higher wages for upper income earners were mostly flat for much of the past decade. Also, many lower-wage households hardest hit by the pandemic have been left out of the past decade’s climb in financial asset prices and home values, he said.

“For the folks who haven’t taken that ride, it feels like a perpetuation of inequality that’s played out for some time,” he said, adding that the “only way to get broad inflation is with a broad overheating of the economy. We have the exact opposite. The bottom third are no where near overheating.”

Klingelhofer said it’s probably also a mistake to watch benchmark 10-year Treasury yields for signs that the economy is overheating and for inflation since, “it’s not a proxy for inflation. It’s just a proxy for how the Fed might react,” he said.

The 10-year Treasury yield
TMUBMUSD10Y,
1.209%
has climbed 28.6 basis points in the year to date to 1.199% as of Friday.

But with last year’s sharp price increases, is the U.S. housing market at least at risk of overheating?

“Not at current interest rates,” said John Beacham, the founder and CEO at Toorak Capital, which finances apartment buildings and single family rental properties, including those going through rehabilitation and construction projects.

“Over the course of the year, more people will go back to work,” Beacham said, but he added that it’s important for policy makers in Washington to provide a bridge for households through the pandemic, until spending on socializing, sporting events, concerts and more can again resemble a time before the pandemic.

“Clearly, there likely will be short-term consumption increase,” he said. “But after that it normalizes.”

The U.S. stock and bond markets will be mostly closed on Monday for the Presidents Day holiday.

On Tuesday, the only tidbit of economic data comes from the New York Federal Reserve’s Empire State manufacturing index, followed Wednesday by a slew of updates on U.S. retail sales, industrial production, home builders data and minutes from the Fed’s most recent policy meeting. Thursday and Friday bring more jobs, housing and business activity data, including existing home sales for January.

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Business

Tech Stocks Propel S&P 500 Higher

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Technology stocks led the S&P 500 higher Thursday, pushing the broad index toward its first gain in three trading sessions.

Shares of chip companies, IT services providers, electronic equipment and software companies all rallied, pulling tech stocks in the S&P 500 up about 1%. Those gains, while most other sectors were either marginally higher or trading in the red, led the S&P 500 up 0.2% in midday trading following two straight days of losses.

That also helped pull the Nasdaq Composite up 0.4%, while the Dow Jones Industrial Average, which has less exposure to tech compared with the S&P 500, was mostly flat after notching a record a day earlier.

Some solid earnings supported the gains, along with ongoing expectations of additional relief measures by Congress to support the economy, analysts and investors said. The latter got a boost after fresh data showed that 793,000 Americans applied for first-time unemployment benefits in the week ended Feb. 6, while new applications for the prior week were revised higher to 812,000.

“There is still obviously a significant number of jobs that have been lost, and there is clearly a need for more fiscal support,” said Shoqat Bunglawala, head of multiasset solutions, international, at Goldman Sachs Asset Management.

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