According to a recent New York Times article, the average rate on a 30 year fixed-rate mortgage was 3.8%, the lowest since May 2013, and far below the 5% plus-rates of early 2011.
Families who mortgaged their properties when rates were higher than at present may be induced to refinance if the savings from the lower monthly payments justified the up-front costs of refinancing. It would also seem logical that the lower rates would result in more purchases and presumably at higher prices.
Just how mortgage interest rates affect the a-typical Hamptons real estate market were questions I posed to Christopher Minardi, Branch Manager of the East Hampton Division of GuardHill Financial Corp.
How common are cash as opposed to mortgage-financed purchases in the Hamptons real estate market?
CM: The higher the price the better the chance it’s a cash deal. I don’t see many loan applications for waterfront. More and more deals are cash, but with low interest rates I’ve seen many more inquiries from people who do not include a mortgage contingency in the purchase contract but do mortgage the property to take advantage of the low interest rates.
Is that true in particular price points?
CM: I would say the 2 to 3 million dollar price range.
Do lower interest rates have the same impact in the Hamptons as other real estate markets?
CM: Yes. Low rates means cheaper borrowing power, more house for the same money, or same house on a better budget.
Do lower interest rates lead to refinancing as much as other markets?
CM: Yes. The funny problem I see is that in 2004-2006, and then 2010 to present, rates have been at an all-time low and everyone has already financed. People are reluctant to do it again because lenders are tough on paper work and guidelines. I try to make the process as easy as possible which is why I have been busy non-stop for the past fifteen years.
Is it difficult to get a mortgage?
CM: No. It’s difficult to be well qualified. If you’re not, then you need an expert to get it done correctly, or at least a quick “no.” I’m a believer in a quick yes or no.
How are first-time buyers and senior citizens affected by lower rates?
CM: First-time buyers get lower rates which equal lower payments or more buying power. I don’t encounter seniors much, but they would be able to refinance to lower carrying costs if they are on a fixed income.
To gain some perspective on the Hamptons real estate market, consider that in New York, a high-priced area, Fannie Mae and Freddie Mac will buy loans and the Federal Housing Administration will insure loans up to $625,500. The median prices of homes in Suffolk and Nassau Counties 300k plus and 400k plus. In the Hamptons it is closer to 1 to 2 million depending on location.