All of the recent press regarding the current mortgage meltdown and rising rate atmosphere is enough to make a borrower or their real estate agent a bit queasy. Of course those who can weed through all of the negative press and decipher what this means to our local Manhattan real estate market are having a little less agida. So what does it all mean:
First and foremost, the mortgage brokers and bankers to whom I’ve spoken have all indicated that the sub prime market was less than 5% of their local business. Remember that we’re talking Manhattan here. But we’re not talking just sub prime anymore as the spread of lending fears to the prime mortgage market have resulted in higher rates across the board for many. Just this morning, one of my associates (she works for me which is why I have the emails) shot an email off to a client who is purchasing a one bedroom on the Upper West Side. Here’s the email Q & A:
Agent: I was just in a meeting in my office- discussing state of market and mortgages. Have you locked in a rate at all- what is the current status of your loan?
Buyer: We’ve locked in a $417,000 mortgage(we will be putting up $133,000 , $55,0000 at signing and $78,000 at closing). 30 year fixed at 6.75%. It was .25% above our original estimates. Putting the extra $23,000 down is not only a wise investment, it also keeps us out of the jumbo market, and lowers our monthly payment.
So these buyers are avoiding the higher rates in the jumbo market by putting more money down. Fortunately for them, this is an option. For many of our buyers in the past several years, the extra down payment would not have been an option because it would change the buyer’s financial picture and negatively effect the way in which a co-op board perceived them.
These tightening lending standards are exponentially increasing the financial quality of the buyers in our current marketplace. Having said that, those marginal buyers who can’t come up with the extra down payment or no longer qualify for their loan based on a higher interest rate/a higher debt to income ratio won’t be shopping for an apartment anytime in the near future. The only way this pool of less qualified buyers can enter the purchase market is if lending standards ease (possible but not likely anytime soon) or prices come down (that is the million dollar question). The latter is the healthiest way in my opinion to welcome once marginal buyers back into the housing market.
In the meantime, those who can’t afford to buy a home, can’t actually buy a home. Wow!!! What a novel concept!