New York City HABITAT magazine
If inflation continues to cool, the Federal Reserve could cut interest rates again this summer. While that might persuade some co-op and condo owners to get off the sidelines and put their apartments up for sale, the shortage of inventory will probably persist for years, according to Jonathan Miller, president and chief executive at the appraisal firm Miller Samuel.
“Interest rates can’t fall low enough for inventory to flood into the market,” Miller tells Brick Underground. “Because rates will be lower, there’s going to be an increase in demand. We’re running at such a deficit that in terms of supply, I think this is going to take years for existing inventory [to catch up].”
New York City’s sales market slumped in 2023 as increased mortgage rates limited financing options for buyers and encouraged sellers to stick with their lower rates. Those factors are still at play today, even as the 30-year fixed mortgage rate has dropped, sinking below 7% this week to 6.95%, Bankrate reported.
“There’s already more inventory coming in because rates are lower,” Miller says. “But at the same time that rates are falling and enticing more sellers to come in, there’s more buyers because rates are lower. It’s offsetting.”
There were 14,740 homes available for sale in January of this year, well below the 15-year peak in October 2020 of 22,153 units, according to StreetEasy data cited by the New York City Comptroller Brad Lander. Over the same period, the median home price has risen from $675,000 to $785,000.
As Miller sees it, the good old days of historically low interest rates are history — the kind that’s unlikely to repeat itself. “It’s a better year in the sense that rates are coming down or have come down from 2023 highs,” he says, “but it seems wildly optimistic to think that they’re going to go anywhere near where they were during the pandemic, in the neighborhood of 3% or 4%.”
The bottom line of the city’s chronic shortage of apartments for sale?
“Housing is, in the near term, going to be more expensive than it has been over the last decade or so,” Miller says.