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The regional housing market in the New York City metro area continued to slow in the third quarter of 2023, with sales falling even while low levels of inventory drove prices to more historic highs. Going forward, we believe that rising interest rates will finally start to impact prices by the end of the year, and do not expect meaningful price appreciation in 2024.
Interest rates have continued to rise, restricting inventory and hampering buyer demand. The big story of the past two years, of course, is the unrestrained spike in interest rates, which have gone up from about 3% in early 2022 to about 8% by the end of the third quarter of 2023. These interest rate increases have impacted the real estate market in several significant ways.
First, higher rates have severely restricted our available housing inventory. Why? Because many homeowners who might otherwise sell their homes cannot bear to give up their historically-low fixed-rate mortgage. Thousands of homeowners throughout our region currently have mortgages with interest rates below 4%, and in many cases below 3%.
Some of them purchased their homes in the past five or six years, when rates were at historic lows, while others smartly refinanced their existing loans to lock in those lower rates. Now, those homeowners have “golden handcuffs” keeping them in their current homes. Even the owners that might want to sell, perhaps because their home is now at its highest value in history, are thinking twice about it, because they are loathe to give up the attractive rate they have on their current home. prices will stabilize near their current highs going into 2024.
If you think about it, this is an unprecedented situation in the modern housing market. Interest rates have generally been flat or falling since the early 1980s, over 40 years ago. During that whole time, homeowners never felt locked into their home because of a favorable interest rate, because they could always get a similar or much lower rate when they bought a new home, or just refinanced their existing home.
For an in-depth review of the region and your local county, please follow the links to the detailed reports below.
