How I saved one client thousands of dollars (with video explainer!)
September 11, 2024
An interest in rates
Welcome to the second edition of my blog! For everyone who returned for my encore performance, I appreciate you. And if you’re just checking in for the first time, I’m so glad to have you. This blog is where I give you my perspective on what’s really going on in New York real estate, from someone whose boots (or sandals, for another few weeks!) are on the ground!
Last month, we talked about how we make sense of the chaos in the market. At the time, a massive stock selloff had just sent global equities markets into turmoil, and there were urgent calls for the Federal Reserve to finally bring down rates.
Within a short amount of time, the stock market bounced back, with the S&P 500 reaching new all-time highs. And the Fed kept rates the same last month, although they announced it was time for a policy change. The path for future Fed rate cuts is more certain.
As shown by the Fed funds futures, the market predicts a 0.25% rate cut for this month and potentially a whopping 0.5% cut in the Fed’s meeting in November.
Important Note #1: Don’t get too excited yet, as the market has been wrong before (like the past 18 months straight…).
But this is certainly a good sign for buyers and sellers alike, as it reflects the positive signals being sent by the highest banking system in the country.
✨🏡✨
Are you dreaming of your next home? Book a free 30-minute consultation with me with no strings attached.
Are rate cuts getting priced in?
I’ve been hearing from clients that they’re excited about the impending rate cut because they believe it could lead to lower mortgage rates.
However, the truth is a little more complicated.
GOOD NEWS: Mortgage rates have already dropped for four straight weeks!
But the Fed hasn’t started cutting rates yet.
So why have mortgage rates already dropped? It’s because mortgage rates are not directly set by the Fed.
When people talk about the Fed raising or lowering rates, they mean the federal funds rate, which is the interest banks can charge other banks for short-term loans that they need to meet their daily reserve requirements.
The federal funds rate can affect the interest rates for consumers, such as credit card APRs and car leases, but mortgage rates are even more tied to the 10-year Treasury yield than to the federal funds rate.
Mortgage rates, like the 10-year Treasuries, reflect the market’s sentiments. Investors have been feeling more optimistic lately that the Fed will start cutting rates, which signals that it believes inflation has cooled. This drives investors to purchase more 10-year Treasuries, as lower interest rates make buying Treasuries more attractive.
We all know that when demand increases, and supply is limited, the price goes up.
So, the prices for 10-year Treasuries have increased.
If you prefer a video explanation…
But since the notes offer fixed interest payments (the coupon) when issued, as the Treasury prices increase, the yield (the return on this investment) decreases.
This is just like if you are buying an investment property that has an existing lease paying out a certain amount: the more you spend on buying this property, the less your cap rate is!
And when banks set mortgage rates, they use the 10-year Treasury yield as a benchmark, albeit with a risk premium added on top. When the yield goes down, the mortgage rates generally go down as well.
So that kind of helps to explain why mortgage rates have dropped for four straight weeks even with the Fed dragging its feet.
True story: My clients’ amazing mortgage deal
In early June, one of my clients entered into contract to purchase a new home. They had locked their mortgage rates in early June. By late August, they renegotiated their mortgage rate down a whopping 0.725% (special shout out to my lending partner Mike Bomparola from CrossCountry Mortgage for making this happen!). They’ll save thousands of dollars over the lifetime of the loan.
My clients were able to benefit because they were first-time home buyers.
Many lenders offer special programs for first-time home buyers. If you qualify, these programs can help you significantly lower your costs. In my client’s case, CrossCountry Mortgage, a Douglas Elliman partner I referred them to, provided them with $6,500 in down payment assistance and a $500 rebate for bank appraisal (totaling $7,000 of free money!), through Community Promise, a first-time home buyer program. In addition, this program only required 3% minimum down payment.
With the extra cash freed up, my client was then able to further buy down their interest rate—in essence, paying a little more up front to save a lot of money down the road.
Another mortgage program I love is from Citi’s Law Firm Group, a private banking service with special offerings for some top legal practices and attorneys. My husband used to work in big law, so I’m all too familiar with the grueling hours and sudden disappearances (of my husband at dinners, vacations, etc!). But working in big law does come with perks, and one of them is your firm might be a part of the Citi’s Law Firm Group program: it offers a 0.25% discount on mortgage rates, 90% financing with no PMI (private mortgage insurance that’s usually required when financing more than 80%), and a free rate-lock for 120 days (excellent for co-op purchases which can take longer with the board approval process).
Important Note #2: If you are buying a co-op or condo, the board will have its own minimum down payment requirements that may be higher than what these low down payment programs allow!
My client was lucky enough to qualify for CrossCountry Mortgage’s Community Promise program because they lived in an area that was an eligible census tract, were first-time homebuyers, and planned to live in the home as their primary residence.
And that’s why you shouldn’t start your journey alone. I couldn’t be more excited for my clients to start the next chapter of their lives, and I would LOVE to help you figure out if you could qualify for any extra assistance that you can get in this expensive city!
Truly yours,
Judy
In late August, I spoke with Kim Rittberg, an award-winning video marketer, coach, and podcaster, for her show The Exit Interview. We talked about my personal journey from my home country of China, to the UK for high school, and arriving in New York as a newcomer with no connections and two suitcases (shout out to Zack, now my marketing manager, for helping me carry them from JFK to my dorm room 15 years ago!), as well as how integrating videos in my marketing plan this year has helped me rekindle old connections and create a thriving business. Listen below!
Make it stand out
Whatever it is, the way you tell your story online can make all the difference.
State of the market
Here are my quick takeaways from the Q2 2024 Brooklyn market report:
It might be four years since the pandemic had everyone moving from Manhattan to Brooklyn. But Brooklyn is still hot, baby! The median sales price rose to the highest on record, reaching $990,000, increasing year over year by 4.2%.Median sales price for condos increased annually by 14%, to $1.085M, breaking another record. As the appeal of BK rises, so does the price tag.
Listing inventory increased 14.5% annually, the first time it’s up in nine quarters! This is partly because sales volume declined by almost 5% year over year, so there are more properties available for sale, and the pace of the market (months of supply) slowed. However, Brooklyn is still selling, compared to pre-pandemic times, with sales volume remaining 4% above the second quarter decade average.
Greenpoint and Williamsburg experienced a 68.2% annual surge in sales, reaching 12.3% of the borough market share. I am happy to have contributed to this surge with my buyer’s beautiful three-bedroom condo by McCarren Park, which closed in July!
Cash deals were 42.8% of sales closed in the last quarter, the third highest in a decade of tracking. The highest record of cash deals was in the prior quarter, reaching 45.4%. With the interest rate cuts on the horizon, the market share of cash buyers might reduce further in the coming months.
Bidding wars also slipped a little bit, to 18.6% of market share, down from 20.2%, a welcome relief for buyers (bidding wars are stressful!). But as median sales price hit new highs, this could also be a sign that sellers are pricing more accurately in the market. As a result, when bidding wars happen, the premium paid was 7% over last asking price, slightly higher than the 6.3% premium paid in the previous year.
