Brooklyn by the Quarter
In some ways, nothing changed in Q3 of 2024. In other ways, things may never be the same.
Casey Soloff is a Licensed Real Estate Salesperson with Compass, a 20 year resident of Brooklyn, and founder of the monthly Dadurdays meetup at Wild East Brewing Co. in Gowanus.
Looking back at Brooklyn this past quarter, you would never suspect that interest rates, after a steep two year climb to their 23 year high, finally began their much anticipated descent. Or that the real estate business underwent a shift that could change the way property is bought and sold for the foreseeable future.
No. If you read the latest market report, you would assume it was business as usual. Prices across the borough continued to tick up incrementally, again. Luxury apartments outperformed the rest of the market, again. Condos continued to shine, while co-ops and houses lagged behind in the number of units closed. Again.
But even though the numbers show a steady three months in Brooklyn, real estate actually witnessed some major events in the third quarter of 2024.
Interest Rates Came Down. Mortgage Rates Went Up.
Of course, the biggest news of the quarter happened on September 18th, when the Federal Reserve lowered interest rates by 50 basis points, down from the highest they’ve been in 23 years.
Since then, mortgage rates have gone… up?
I’m afraid so. They dipped for a couple weeks, but have since more than made up for that drop. Explaining how banks decide on what rates they offer is a conversation best suited for a finance professional, but suffice it to say that the federal funds rate isn’t the only factor that lenders consider when offering mortgages. A healthy economy can lead, ironically, to higher interest—if, say, a stronger-than-expected job report comes out (which it has), it’s a sign that rates don’t need to come down. Don’t shoot the messenger.
The good news is that this is a step in the right direction, and we should begin to see rates trend downward in the long run. It also means that buyers have another opportunity to own before home prices climb. The long held belief in this market has been that the best time to buy is before mortgage rates come down (and, presumably, prices go up). Those who know the maxim “marry the house, date the rate” will understand the wisdom of this, and have been actively searching, knowing that mortgages can always be refinanced when rates come down, but the price they pay for their homes is eternal.
Lenders Offer Innovative Products to Incentivize Borrowing
Regardless, lenders make money when people transact, and to stimulate transaction in this environment, some are offering aggressive and inventive products:
Until the end of the month, Citizens Bank is offering a $10,000 closing credit to select First-Time Home Buyers, which can be used to buy down your rate (or pay for one hell of a housewarming party—the choice is entirely yours). Qualification depends on where you where you’re moving from, not where you’re moving to. Danny Sassoon, Loan Officer at Citizens, can explain why.
If a borrower has low income but significant liquidity, US Bank will use that as an asset to offset lower income. While this seems logical, it is one of the more aggressive asset monetization programs in the business. David Dessner, Loan Officer at US Bank, will tell you all about it.
Most banks will shave your rate if you park your assets with them. Wells Fargo has tiers of relationship banking, starting at $250k which gets you an .125% off your rate, all the way to $25M+, which would get you 1.125% off. Talk to Faisal Farooq, Sales Manager at Wells, if you’re interested in learning more.
Changes Made to How Buyer’s Agents Get Paid
In addition to the Fed lowering rates, the Real Estate Board of New York (REBNY) now officially recommends (but does not yet require, as is the case in other parts of the country) the use of a Representation Agreement between a buyer and their agent. This has led an increasing number of agents to insist that their clients ensure a certain level of compensation in case the seller isn’t offering any, or isn’t offering enough. This extra expense can often be negotiated into the price (and thus the mortgage), but if not, it is paid by the buyer as an additional closing cost.
This is the latest in a chain of events that started late last year, and have led to the widespread misunderstanding among sellers that they are no longer “required” to offer a commission to the buy side. But this has never been required.
Commissions have always been negotiable, and offering compensation to a buyer’s agent remains one of the smartest investments you can make in the sale of your home—in this agent’s opinion, one that is necessary to achieve the most successful sale possible. It seems that the vast majority of sellers understand this, and are continuing to offer commissions to both sides.
If You Have Questions, I’m Here to Answer Them.
The true effects of these changes may not be seen for a while. But in the meantime, if you need help making sense of the market in these turbulent times, or just have a few questions about buying or selling, I’m happy to chat over the phone or meet up for coffee. Please don’t hesitate to reach out by phone or email, or to follow me on Instagram for timely information on the market.
Enjoy the rest of the fall, and keep an eye out for my Q4 update in January 2025.