Allow me reintroduce myself
August 6, 2024
If you’re wondering why I’ve started a newsletter, then let me give you a little backstory.
In April 2021, after running my own translation business for six years (woohoo Cantos Translations!), I got my real estate license. Interest rates were 2.65%, open houses had long lines, and bidding wars were happening everywhere.
But over the next two years, interest rates tripled, causing chaos for buyers and sellers alike. In Manhattan, we saw some price drops, but it was hardly enough to outweigh the increased mortgage payments buyers were facing. This was because sellers didn't want to give up their low mortgage rate for a high one, causing inventory to plummet. With few affordable options, buyers were left in the lurch.
At family and friends’ gatherings, people often asked me to help them make sense of the market. They needed to know how to navigate the confusing and stressful world of finding their next home.
Cutting through the noise
Yesterday—August 5, 2024—was a good example. Global stock markets abruptly ended a months-long rally in a massive sell-off that saw the S&P 500 plunging more than 8% from its peak. Experts predicted that the Federal Reserve might finally cut rates to stave off further disaster.
What would that mean for the prospective home buyer? How would they know?
For most people, their home is their most valuable asset, and the people who reached out to me, whether through referrals or from within my own network, were looking for the unvarnished truth about real estate.
A lot of people were asking me about a catchy turn of phrase they'd heard: "Marry the house, date the rate." Essentially to buy now in spite of the high interest rates, then refinance later when rates come back down to Earth.
I'd heard the line, too, from one popular real estate influencer or another. The thinking goes, if you buy when other potential buyers are priced out of the market, you'll face less competition. And you might even come in under the asking price.
There are many issues with "marry the house, date the rate," I explained. For one, you won't earn equity as quickly if you're struggling to pay off the high interest. It also doesn't take into account the refinancing costs you'd have to pay when you take out a new mortgage. If rates do come down meaningfully and you refinance into a lower-rate mortgage, that could be ideal, but who knows when that would be? The timeline for a rate cut kept getting pushed back, and a cut of 25 basis points or 50 basis points would not make it worth the refinancing cost and trouble.
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What your fave real estate influencer doesn't get
My advice was simple. Don't buy a home you can't afford today. Instead, look for a more affordable home. Or wait until you save up for a bigger down payment, so your monthly mortgage is more manageable.
Important distinction: I am not advising you to wait for the rate to come down. Do not try to time the market. My advice is to buy within your means, at the right time for you.
If you manage to save up for a larger down payment, not only will you be able to knock out a significant chunk of the principal, but this may also make you a stronger bidder than a competitor with the same (or even higher) offer price, because you would be more likely to be approved by a lender and the building’s board, making you the safer choice. And it could help you avoid additional costs like private mortgage insurance.
So that's the story of how I saved my friends thousands of dollars—and talked myself out of commissions. You're welcome.
It's those kinds of stories that landed me on the idea for this newsletter. Your source of real estate information should be as reliable as possible, since buying, selling or renting real estate will be one of the most important decisions you'll ever make.
Once a month, I will share my distillation of what’s happening in the market, broken down into clear points for you, while I do the work of sifting through market data, macro-economic trends, and boots-on-the-ground experiences with actual clients.
I hope that, through my words, you'll feel empowered, and that you'll find something worthwhile to chew on while you ponder whether and when to take that next big leap.
This is a journey we're taking together!
In late July, I spoke with Debbi DiMaggio, a fellow real estate agent based in California, for her Mastering the Art of Real Estate podcast. Listen below!
State of the market
A few quick takeaways I got from reading the dense Q2 2024 Manhattan Market Report:
1. Sales volumes are up 12% year over year, as people psychologically adjust to the high-interest-rate environment, and many buyers and sellers feel they can no longer wait to make a move (think a growing family of three or even four squeezed in a one-bedroom, or an empty-nester with not much income hanging on to a four-bedroom). But sales volume still hasn’t quite recovered, landing almost 6% below the second-quarter decade average.
2. Listing inventory is up 4% year over year, and almost 14% above the second-quarter decade average. But more homes are selling than before, so the pace of the market (“months of supply") actually accelerated. Still, the months of supply measurement hasn’t quite recovered to the average, since sales volume isn’t fully back (see point 1).
3. Cash deals were 62% of sales closed in the last quarter. For sales under $1m, 52% of transactions were cash. For sales above $5m, 99.6% of deals were cash. This partly explains why cash buyers in the luxury market are not seeing the kind of cash discounts they might expect, as almost all competing offers are cash too. One reason for this is that high-net-worth individuals are leveraging their stock portfolios for a revolving line of credit with potentially better interest rates.
4. Sellers are pricing more accurately than last year, as the number of sales with price changes fell to 27% from 39%.
5. But even with fewer price changes, listing discounts from last list price are up to 11%, almost double that of a year ago, which was 5.9%.
6. One of the age-old benefits of owning a home might be becoming a bit blurrier, as monthly carrying costs (money that doesn’t build equity) keep increasing. The average monthly maintenance cost for a co-op sale was $2,960, or $2.64 per square foot per month, a new high and up almost 8% annually. The average monthly common charge plus real estate tax for a condo was a record $4,429, up almost 2% annually, or $3.08 per square foot per month. To understand this, imagine you paid cash for a 700 square feet one bedroom condo: your monthly carrying cost would still be over $2,100 per month!
