February is typically when the real estate market begins to reawaken and 2020 is off to a strong start. Over the last 30 years, the 30-year fixed mortgage has averaged about 6.25%. Historically, cheaper mortgages have brought life to the housing market, but over the last decade sale prices have nearly doubled in NYC. Believing a reduction in rates alone will drive home sales is like a 15% off sale at Bergdorf Goodman. You still have to pay $2,300 for a $2,650 sweater. Low rates help, but they cannot offset the tremendous growth in housing costs we’ve seen over the last decade. However, pricing is normalizing and buyers are taking notice.
The 30-year fixed rate is 3.250% compared to 4.625% just one year ago. That is a decrease of 1.375%, which has a significant impact on monthly carry. Borrowing $1M at 3.250% equals a monthly payment of $4,352.00 compared to $5,141.00 at 4.625%. That is a difference of $789.00 a month, which is an 18% increase in purchasing power! That is a lot of math, but you get the point. Lower rates are starting to matter again now that prices have come down.
If you would like to speak with a mortgage professional about current interest rates for new purchases or refinancing, please let us know and we will be happy to connect you. We maintain relationships with top professionals at all the major banks and mortgage brokerages.