September 2023 Real Estate Market Overview

The real estate market has seen some turbulence as mortgage interest rates continue to rise, while demand for mortgages and refinancing both continue to fall. At the same time, inventory remains very low compared to potential demand, which helps to keep prices up despite relatively low demand. Meanwhile, New York City (as well as other cities around the country) are moving ahead with plans to convert offices to residential real estate, in an attempt to address both the issues with inventory and the large number of offices sitting empty.

Mortgage Demand At Record Lows

Mortgage demand is now at record lows, falling to about 30% of what they were the same time last year in the third week of August. This dramatic decline in mortgage demand also extended to refinancing, which was down 35% year over year. This is the lowest that mortgage demand has been since December 1995, about 28 years ago.

Interest Rates Rise to 23-Year High

A major contributor to this decline in mortgage demand is a skyrocketing mortgage interest rate. The interest rate for a 30-year fixed interest mortgage with conforming loan balances reached a high of 7.31% in August, the highest it has been in 23 years. Adjustable rate mortgages saw a similar increase, reaching a high of 7.6%.

Available Inventory Remains Low

Another aggravating factor is consistently low levels of available housing inventory. While there are an estimated 7.3 months worth of houses on the market, this is due in part to the record low demand. In reality, the number of homes available for sale has been steadily declining since late 2020, and homebuilders have yet to compensate for this with new housing.

Cities Move Forward With Office Conversions

In an effort to proverbially kill two birds with one stone, cities around the country (including New York City) have been moving forward with plans to convert empty offices into residential spaces. This is due in part to many companies moving to work from home policies, leaving them with office space they no longer need but are struggling to sell. By converting these empty offices to homes, they hope to limit the impact on the commercial real estate market while also addressing the severe need in the residential market.