A $700,000 two-bedroom, two-bathroom condo had monthly carrying costs of $2,809 (plus taxes and common charges) in March, when the interest rate on a fixed-rate 30-year mortgage was 4.4 percent. With interest rates now averaging 6.6 percent in October, the carrying costs each month would be $3,582. A buyer in March with good credit and a 20% down payment would need to reduce their budget to $549,000 this month, or $151,000 less, to maintain the same monthly payments.

Today the options for buyers are to wait for interest rates to come down, and possibly pay skyrocketing rent prices until then, or pay more now and refinance later.

Which to choose?

Nearly one-half of Manhattan purchasers pay all-cash. When the market is hot and bidding is competitive, buyers using mortgages are too-often pushed out by cash buyers. They bid on every high-quality property, and too frequently their bids are rejected. However, when transaction volume decreases over the sales cycle, bidding becomes less aggressive and purchasers have more time to consider their options. Sellers become more willing to accept financing contingencies. The chances of becoming entangled in bidding wars decrease considerably, and buyers with mortgages can buy on their terms.

Buyers believe that they want to buy at the bottom, but the bottom usually lasts just a week or two and by the time they realize that the bottom can really only be spotted through lagging indicators, they get back out there only to find themselves caught in bidding wars on everything of quality once again.

The mistake buyers make in a Buyer’s Market is they think they should wait until certainty returns, but uncertainty is their friend because it reduces competition.

Another mistake is to expect to see market-wide adjustments on price, but if the post-covid lockdown market in 2020 taught us anything it’s that Manhattan sellers have the means to wait if they don’t get their number. This fall we’re only seeing price reductions on properties where the owner really wants to sell or that have been overpriced for several months or longer.

The Bottom Line

If you are a seller, price aggressively.

If you are a buyer, even though it may seems early, your time is now. Savvy buyers buy on the way down because they know that having their dream deal tee'd up and ready to go in the tiny window of time that is the bottom is almost impossible. Reduce your budget if you have too, but don’t miss your opportunity to buy on your terms.

If you are a CASH buyer, find a deal and snap it up!