One data analyst breaks down what he expects this fall in big markets like New York City
It has been a tumultuous year in the mortgage market, as elevated rates have kept the market somewhat stagnant in many areas. With the fall buying season starting next week, one data analyst gave his thoughts to Mortgage Professional America on what mortgage brokers can expect, especially in big city markets.
John Walkup (pictured top) is the co-founder of UrbanDigs, a real estate data analytics company. He keeps a close eye on the New York City metropolitan area. Like many other cities, Walkup is waiting to see some thread that ties different housing sectors together.
“It's a really interesting time, both in New York City, but also nationally,” Walkup said. “Because there's no one compelling narrative that ties everything together. We've got different regions doing different things. We have different sectors and price levels doing different things.”
He said the only area that has been business as usual is the luxury market, mainly because they pay in cash for most deals. Walkup said the line that divides the luxury buyers from non-luxury is $4 million in Manhattan and $2 million in Brooklyn.
“When I think about that mortgage market, I'm really focusing on that sub-luxury,” he said. “It’s obviously summer. This is the slower part of the year in terms of seasonality. This is the trial before we get into, hopefully, an active fall season.”
Summer slowness
Walkup said there are a couple of factors that he has seen that have kept the summer buying season even slower than usual. He’s wondering whether those factors will carry over into the fall season.
“We haven't really seen prices decline based on that slowness,” he said. “We’re just seeing a little bit of softness, but you're not seeing anything like big declines in price. They're basically just trending sideways. And that's what we're seeing with activities, sort of churning sideways at a lower level.”
Despite elevated rates at the beginning of the year, Walkup said the housing market got off to a good start. However, when tariffs were announced in April, it began a period of turmoil that has largely kept mortgage rates elevated.
“The market got off to a good start at the beginning of the year, and then, come April, unless you lived under a rock, there was a lot of crazy stuff happening in April and May, and that kind of threw this market for a loop,” Walkup said. “And while the luxury market was able to shake that off, that non-luxury market just slunk back into its shell, and has been turtling and treading water.”
Like everyone else in the mortgage market, Walkup is hoping that even a slight decline in rates going into the fall could turn that short buying season into a successful one for brokers, lenders, and agents.
“Rates are just simply out of reach for a lot of people,” he said. “If we can get those rates down a little bit, get it closer to 6% and 6.5%, I think you could see a lot more activity. In the meantime, as we come up to the traditional start of the fall market, the first thing that typically happens is you get a deluge of inventory.
“We're not expecting a huge, sharp spike, but we are expecting a bump in inventory. If we get that bump in inventory, but we don't get a corresponding bump in demand, that might shake the snow globe a little bit. We're starting to get some sense that buyers are on the sidelines waiting to go. So I'm cautiously optimistic that the fall market will hopefully be a good one.”
Hoping buyers show up
Walkup said he doesn’t think elevated mortgage rates are the only reason for hesitation in the market. He feels that many people are paralyzed by pessimistic headlines, which are causing them to put off potential mortgage transactions.
“I feel like risks are not necessarily macroeconomic risks,” he said. “I don't necessarily think that they have anything to do with mortgage rates. I don't think they necessarily have to do with people worrying about their jobs. I think a lot of it is a headline. Headlines that inject an unnecessary dose of uncertainty into a lot of the major life decisions that people are willing to do.”
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And while the headlines at the beginning of the spring revolved around tariffs and their potential implications for the household budget, now headlines surround the Federal Reserve, potential changes there, and what a reduction in independence might do to rates.
“I think you have these headline risks out there which sort of just make people pause ever so slightly,” Walkup said. “Especially if you're thinking about taking out a big loan to buy a house, that's all the more reason to pause. While I think the economy seems like it's doing fine, and I think that buyers are ready to get in, I still think that there's that fear in the back of their head that like, what's next?”
Even with all the headlines, Walkup said it’s going to come down to whether buyers are ready to move off the sidelines and into their mortgage broker’s office to begin the loan process.
“The elephant in the room is, are the buyers going to show up?” he said. “It remains an open question. I think we've got some tail winds. I think we've got a little bit of a downturn in mortgage rates, and I hope that trend holds, because I think that could bring a lot of folks off the sidelines. I’m cautiously optimistic, but again, it all comes down to the people, and let's see how they react.”
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