With home loans approaching price levels not seen since the Great Recession, the most affluent buyers appear to be increasingly saying “no, thanks” when it comes to mortgages.
In July, about 75% of new condo buyers in New York plunked down cash for their purchases, according to data from the listings and research firm Marketproof. In June, that share was about 60%, according to the data.
Existing condos, which tend to be less expensive than new versions, are seeing a rush of cash buyers, too, according to Marketproof: Nearly 60% of condo deals involving resold units in July were paid for in cash, a historically high number. In fact, in a more low-interest-rate environment, usually only about one in three are cash deals, brokers say.
What seems notable is that cash deals for new luxury apartments are spiking even as prices are increasing. Indeed, the average price of a new condo in July, almost $2.6 million, was up over the June average price of $2.1 million and also represented a high for the year. Resold condos, meanwhile, sold for an average price of around $1.6 million last month.
“The high end, the people who have money, they’re just not financing,” said Brian Scott Cohen, a senior loan officer with the mortgage brokerage Guaranteed Rate Affinity. Cohen said he’s never seen so many cash deals in his nearly two decades in the industry. “And with newer development, there’s usually a longer sales window, so buyers have time to put together the cash.”
The loan slowdown has hurt his own work, Cohen said. Refinancings, which make up 30% of his business, have been almost nonexistent in the face of a 30-year fixed mortgage interest rate of nearly 7%, which homeowners haven’t grappled with since the late 2000s.
New condos, which in recent months have been popping up in places where land costs are lower and renters are relocating, such as Queens, account for about a third of all condo sales.
In July, 73% of all buyers of new condos paid in cash, versus 59% in June and 63% in May, according to Marketproof. On the resale side, 59% were cash deals in July, compared with 59% in June and 57% in May, said the data.
Late last month, the Federal Reserve raised interest rates by a quarter point, the 11th increase since March 2022, in a bid to lower inflation to a 2% annual rate. Though inflation has come down in the past couple of years, the core rate still stood at 4.8% in July. And Fed Chair Jerome Powell has said there might be more rate bumps to come by the end of the year, even as the New York Fed’s chairman has suggested that interest rate cuts could be on the table in 2024.