NYC Buyers Hunt Low-Priced Homes As Mortgage Rates Rise: Study

NEW YORK CITY — Skyrocketing mortgage rates has pushed more and more New Yorkers toward an elusive goal: finding a home below $500,000, according to a new study.

Buyers' interest in homes under the half-million mark skyrocketed in recent months, a new StreetEasy study released Tuesday found.

But that doesn't mean there are many homes in that price range even after a hot, post-lockdown real estate market settled down, said Ryan Kaplan, an agent with Douglas Elliman quoted in the study.

"Even so, I’m still seeing well-priced, well-located homes being fought over,” he said. “I expect we’ll continue to see action, especially from buyers who still possess the liquidity and means to purchase in the luxury market, and those seeking refuge from the competitive rentals market that may be after more affordable homes.”

New Yorkers face a growing pinch from rising mortgage rates, even as the typical price of a home in New York City has dropped for four straight months, according to the study.

The typical asking price for a home in July at $990,000, the study found. That's by no means cheap compared to prices elsewhere in the country, but stands a relative deal for the city.

The problem for prospective buyers is that mortgage rates have grown, meaning they'll pay even more long-term, according to the study.

"Based on the historical 30-year mortgage rate and median asking prices, NYC buyers needed 45% more income in July than last year, equivalent to a $59,000 increase in annual earnings from $131,000 in July last year, to qualify for a fixed-rate mortgage for a median priced home assuming 20% down payment," the study states.

The study did find some good news for home buyers, so long as they don't mind waiting.

A cooling real estate market will give buyers more time and less pressure to make offers above asking prices, the study states. Sellers likely also will be forced to make changes such as lower prices as inquiries drop, it states.

And mortgage rates have shown signs of dropping in recent weeks, the study states.

"Home shoppers who have been priced out of the market may view lower rates as an opportunity to re-enter the market, supporting the overall sales market demand," the study states.