It seems whoever you’re speaking with these days when discussing real estate, “mortgage rates” nearly 90 percent of the time comes up in the conversation. Rising rates certainly have people talking, but they’re also prompting buyers and developers to adjust the way they do business, at least for now.
One thing that we’re beginning to see is sellers are willing to take lower cash offers than dealing with mortgage financing and risking a deal not going through, ultimately delaying the transaction. With appraisals coming in below the offered price, lenders are flinching and folding on deals that have been in the works for several weeks. In the end, cash buyers are benefiting from this scenario and securing discounted prices.
Another creative workaround for high mortgage rates that we’re learning about from a NYC developer is paying down the buyer’s mortgage rate. Extell Development is offering to buy down consumers’ mortgage rates by 2 percentage points during the first three years of their loans for two of its buildings, One Manhattan Square and Brooklyn Point. Extell’s founder and chairman, Gary Barnett said, “It’s an important factor for people to try to bring down those monthly costs.” He thinks the rates will eventually come back down, but this will help their competitive advantage in the interim and also help the buyers. It’s a win-win.
There are, of course, other ways to help alleviate the costs of high mortgage rates, if you’re able, as I mentioned in September. Either way, I do agree with Gary Barnett that rates will at some point come down, but for now being creative and exploring all your options is your best bet. And if you’re seriously looking to buy now, it is best to lock in the current rate as soon as you can before they rise further.