What is happening in the real estate market for 2018? Many sellers are lamenting that their respective homes have not sold, perhaps blaming their agents, buyers are waiting to purchase and so I thought I would address potential reasons why and how the year has evolved thus far!
One obvious reason is the new tax law. With home owners only able to deduct mortgage interest up to $750,000 and mortgage taxes of only $10,000, this limits buying power. As a rule, each $100,000 in a mortgage equals approximately approximately a $500 additional monthly expenditure but obviously that also depends upon credit scores, etc. SO, logically, if you cannot deduct X amount, then your monthly costs increase, and buying power is less.
However, we should also note that the Federal Reserve is expected to increase the mortgage rates twice more before years end, and so buyers should also realize that with increased mortgage rates by next year, they will be affording less than this year.
So if the buyers are on the fence this year on whether to sell their home or buy a home at a higher housing price, but lower rate, or to wait until next year, possibly get a lower purchase price, but a higher rate:
One positive note is that the new tax laws while effective this year, will be realized next year and many buyers will have lower taxes which might offset the mortgage increases a tad.
1 Year Ago:
Loan Amount – $750,000 @ 3.5% (APR 3.510%), monthly payment = $3367
Loan Amount – $1,500,000 @ 3.5% (APR 3.510%), monthly payment = $6735
Loan Amount – $2,100,000 @ 3.5% (APR 3.510%), monthly payment = $9,429
Loan Amount – $750,000 @ 4.5% (APR 4.510%), monthly payment = $3800
Loan Amount – $1,500,000 @ 4.5% (APR 4.510%), monthly payment = $7600
Loan Amount – $2,100,000 @ 4.5% (APR 4.510%), monthly payment = $10,640
Possible 1 year from now:
Loan Amount – $750,000 @ 5.5% (APR 5.510%), monthly payment = $4258
Loan Amount – $1,500,000 @ 5.5% (APR 5.510%), monthly payment = $8516
Loan Amount – $2,100,000 @ 5.5% (APR 5.510%), monthly payment = $11,923
$675,000 purchase price ($540,000 Loan Amount) @ 4.5% (APR 4.510%), payment = $2736 (buying the house now)
$625,000 purchase price ($500,000 Loan Amount) @ 5.5% (APR 5.510%), payment = $2838 (buying the house at a lower purchase price, but higher rate)
(Many thanks to Veronica and Dan for the possible mortgage scenarios given above). Veronica Finkel | Sr Home Lending Advisor CPC | NMLS ID 62262 | Home Lending | Chase | 608 Columbus Ave., Thornwood, NY 10594 | Office: 914-420-7875 | Cell: 914-420-7875 |
Dan Amatuzzo | Home Lending Assistant | NMLS ID 599628 | Home Lending | Chase | 360 South Broadway | Tarrytown, NY 10591 | Office: 914-993-7981 | Cell: 646-306-4327 | Fax: 844-315-9418 | firstname.lastname@example.org
Another key important factor is the fact that many buyers come to Westchester from the city, and they must first sell their coops/condos before doing so. There are fewer coops and condos on the market under a million than there were a year or so ago, and putting it simply, buyers entering the market in the city, can’t afford the higher priced properties, and there is a paucity of lesser priced apartments, people can’t afford to ‘move up’ and so the higher priced apartments are simply sitting there. There are many new buildings so the apartments are available but at such high prices, people cannot afford them. Grant Long wrote a great article on the real estate market in the city, explaining in detail stats these past few years.
Buyers are waiting for price drops there, and so this market trend is affecting Westchester sales. It should be noted that private schools in the city can cost up to $50,000 a year, and this is where Westchester’s great schools should make buying a home in Westchester a no brainer! When you start adding the cost of a private school for 2 children in the city, compared to our higher taxes here, then the value of moving to Westchester becomes quite evident as one offsets the other. Plus, Westchester offers beaches, great parks, sports of all kinds, sailing, kayaking and fresh air!! If you live in lower Westchester, you are also 30 minutes or so from the city. The best of both worlds!
However, if a mortgage will cost more for a buyer thus lowering their buying power, it should also be stated that the cash they might have had to renovate a home last year, is also shrinking, and so buyers are also seeking homes that are renovated, and do not require too much work ‘to make it their own’. If there are 10 homes on the market in the same price range, and one of those homes is completely renovated with a newer kitchen, bathrooms, etc. – then it is obvious which house will sell first. Sellers should make sure their home is priced well ( perhaps a tad lower than they would like but to attract as many buyers as possible) , presented well, and any little jobs that require fixing, they should take care of them. We talk about the buyers being fussy, and I hope this article explains why this is so!
The buyers are out there, but they are seeking value. Since there are price drops in the different towns, sellers in New York will potentially offset any loss they might have there with similar price drops in Westchester (higher priced homes) .
Please contact me for all of your real estate requirements!