The forecast doesn't look good for tenants, either in the short or long term. Rising mortgage rates will drive some buyers out of the sales market, putting more pressure on the rental market. And as rents rise, fewer people will move. With no relief in sight from a shortage of inventory, tenants have few options.
Brokers say that Manhattan's wealthiest buyers are more frightened by stock market crashes and cryptocurrency losses than by higher mortgage rates. The increase in Federal Reserve interest rates has led potential homebuyers to turn to the rental market, making a tight market even tighter. Contracts for the sale of apartments in Manhattan plummeted by almost a third in June, when the city's scorching housing market began to cool down amid fears of recession and falling stocks. Manhattan's decline is especially sudden, as the market is biased toward richer, higher-end buyers, who rely less on mortgages and rising rates.
Miller, who said he was “thrilled to see rates rise,” noted that “5 percent mortgage rates are not a bad thing in terms of sustainable housing markets. Inflation is also staying close to its highest level in four decades, adding to a contraction in affordability for buyers, who also have to consider home prices, which skyrocketed when the housing market was red hot during the COVID-19 pandemic. Supply was declining dramatically as signed contracts exceeded the number of new listings coming to market. StreetEasy reports that the city's housing market is starting to cool down after a year of aggressive price increases caused by the reappearance of residents to New York when the city reopened its doors after the closure of the pandemic.
He said sellers still think they can get the best price for their property, and buyers are more reluctant to buy, given market uncertainty and rising interest rates, and overestimate how low they can offer. Along with financial buyers concerned about financial markets, technology and venture capital workers and executives in Manhattan are also withdrawing their real estate investments, fearing layoffs and cost cuts. To learn more about the state of the housing market and to see prices by neighborhood, see the full StreetEasy report here. Markets such as Tampa and Phoenix, which saw some of the biggest price increases, could be affected and fall with margins of 5 to 10 percent.
And in the rental market, it's “The Hunger Games,” as rents soar and potential tenants in cities across the country compete with dozens of other applicants. New contracts signed in the Brooklyn cooperative market fell nearly 24 percent annually, to 142 in June, from 186 at the same time last year, according to the Miller report. Miller said the number of contracts signed should have continued to increase until the end of May, as the spring market is usually the most active.