10YR Yield Breaks 3%

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
Ok, the world has changed folks. Will need to talk this out over time. For now our markets remain quite active, rental markets are crazy active and price trends seem to be topping out after a nice, sustainable recovery from covid lows

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nicolebeauchamp

Well-known member
Will be interesting to see if more people start really considering ARMs again in our market

I was just down a rabbit hole looking at the basis point increases for FRM and ARM in recent months....
 

inonada

Well-known member
Most of what I look at (high-end Manhattan) seems to be financed with ARMs even before. Something like 2/3rds if not more, of the properties that are financed. Unlike the nationwide conforming market, I’m not sure there is a whole lot of latitude for buyers as a whole moving from fixed too ARMs.
 

inonada

Well-known member
As far as I can tell 30 Year conforming mortgages are about to hit double what they were at the bottom 16 months ago.
By some measures, we’re already there. Mortgage Daily News tracks mortgage rates based on averaging lender rate sheets each day, looking a no-points rates. They have 30yr conforming at 5.6% now, compared to 2.8% available in the summers of both 2020 and 2021. I’ll put a link to their summary page here, which covers many products and indices. If you click around, you’ll see the charts.

 

Kevin Huang

New member
@John Walkup recently did an interesting study to show the correlation of the NYC real estate market prices to 30 year mortgage rates; there doesn't seem to be a lot of correlation based on the one single variable to the NYC real estate market. However, increasing rates may affect the "entry level" price points (<$2m)? Will be interested to hear anyone's thoughts on historical price relationship to mortgage rates based on the different price cohorts.

Demand for real estate markets outside of NYC should "slow down" (i.e., normalize) with rising mortgage rates, but I don't see the supply increasing anytime soon with construction labor shortage and ongoing supply chain issues keeping overall national wide prices elevated.

Here's an interesting chart from Miller Samuel


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David Goldsmith

All Powerful Moderator
Staff member
As I have said before, I think rising interest rates affect lower priced units more than higher priced units because those buyers tend to need higher leverage, and also tend to borrow further towards the maximum of their qualification limits.

However I think it's been underreported how many buyers have held onto their prior properties rather than selling them because mortgage rates have been close to zero. This has been a factor in low inventory because in the past homeowners trading up took a unit of inventory off the market but also added one, but lately only did the first. Soaring mortgage rates could reverse that trend.

PS I think it's hard to look at that Miller Samuel chart and conclude there is no relationship between mortgage rates plummeting and prices soaring. (But I'll also note the part of the chart before 2000 isn't great data: the Coop market absolutely crashed between 1989 and 1992, but the chart shows it at pretty flat. Pretty much all the reports back then were going off very small percentage of the actual transactions.)
 
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Kevin Huang

New member
As I have said before, I think rising interest rates affect lower priced units more than higher priced units because those buyers tend to need higher leverage, and also tend to borrow further towards the maximum of their qualification limits.

However I think it's been underreported how many buyers have held onto their prior properties rather than selling them because mortgage rates have been close to zero. This has been a factor in low inventory because in the past homeowners trading up took a unit of inventory off the market but also added one, but lately only did the first. Soaring mortgage rates could reverse that trend.

PS I think it's hard to look at that Miller Samuel chart and conclude there is no relationship between mortgage rates plummeting and prices soaring. (But I'll also note the part of the chart before 2000 isn't great data: the Coop market absolutely crashed between 1989 and 1992, but the chart shows it at pretty flat. Pretty much all the reports back then were going off very small percentage of the actual transactions.)

Based on the data, it appears prices soared from Q1 2013 - Q3 2015 (the peak) and mortgage rates stayed relatively flat. Price increases resulted primarily from foreign purchasers from Asia primarily China, Russia, and South America buying up property with all cash. I would say low mortgage rates supplemented the price appreciation fuel, but not the primary driver.

Great points David.
 
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