Residential, Commercial Lenders Predict Low Rates, High Demand in 2021

WHITE PLAINS—It’s no secret that the residential housing buying frenzy is continuing with a vengeance in our region, with properties still receiving multiple offers and many would-be home buyers left in the dust.

Low interest rates, currently hovering around 3%, are helping to ignite the desire for home ownership. Lenders throughout the New York metro area have also indicated that some FHA loans can even dip as low as 2.5%. But, how long will these super low rates last, and when will the market eventually return to “normal?”

Irene Amato, owner of A.S.A.P. Mortgage, believes the low single digit rates will be with us for quite a while. “Even if interest rates manage to jump up a full percentage point, we’ll still be at about 4%, which is a fantastic rate,” she said. Headquartered in Peekskill, A.S.A.P. now has eight locations in the Hudson Valley, and will soon be opening a branch in Connecticut and Florida.

Amato’s firm handles about 80% purchases and 20% refinances. “We’re still seeing about the same influx of people, even though there are not a lot of properties out there,” she said. “People new to the market are realizing the value of home ownership and we have a lot of first-time home buyers actually coming in for counseling.”

Typically, lenders review a potential buyer’s income, credit score, debt-to-income ratio, property type and other factors when considering a loan. “What’s starting to happen now is that when buyers bid way over the asking price, there could be a problem if the bank appraisal comes in low,” explained Amato. “In some cases, the buyer would need additional cash to cover the amount that is not going to be covered by the lender.”

Sometimes, noted Amato, the potential buyers need to take a step back and reconsider what and where they’re buying. “That’s why it’s so important for people to review all of their information with their real estate agent, attorney and lender,” she added. “Thankfully, we’ve been able to save some deals because we have the ability to shop rates with a bigger pool of lenders.”

Amato is hopeful that the new leadership at the Federal Housing Finance Agency will help open more doors for first-time buyers. “They’re looking into being able to deliver more affordable mortgages, along with expanding the guidelines for affordable housing mortgages,” she said. “I think this can be a great thing, but it needs to be dealt with very delicately—we don’t want to set someone up to fail.”

Both Amato and David Mizrahi, director of sales and vice president of business development for FM Home Loans, agree that the whole home buying process is a very emotional one. Recently, Mizrahi has witnessed a new resurgence in New York City, following last year’s exodus to the suburbs. With offices in Manhattan and Brooklyn, Mizrahi has seen a lot more activity lately, particularly in Manhattan.

His offices have been busy with closings on co-ops, condos, multi-family and single- family properties throughout the boroughs and on Long Island. “Things are definitely picking up now that the pandemic is on its way out,” he said. “We’re seeing that people are not so hesitant to house hunt in the city anymore. Everyone was expecting New York City to die out, but I always laughed at that.”

Mizrahi predicts the rates will stay low for the time being, with a possibility of a slight increase. “I don’t see them going up dramatically over the next six months,” he said. “I think anything under 5% is really good rate.”

Recalling 20 years ago, when rates hovered in the double digits, Mizrahi said he can’t see those days returning any time soon. “Of course, everything depends on the economy,” he added.

While New York City properties are selling for close to asking price—or some slightly above asking price—Mizrahi said that’s not the case on Long Island. “There’s still a lot of bidding wars and people are offering thousands over the listed prices. That, in turn, can affect their mortgage because if a property doesn’t appraise for the full value, the buyers will need a larger cash down payment,” he explained.

As some city renters may still have eyes for the Hudson Valley when it comes to purchasing, Mizrahi notes they’re not losing any business from people who still want mortgages for New York City properties. “Look what happened after 9/11, people said that no one would be living in lower Manhattan and now buildings are just getting bigger and more people are moving in,” he said. “Things are slowly starting to get back to normal. Time heals everything.”

On the commercial lending front, Robert Withers, president of M1 Capital, also believes the lower interest rates will be with us for the foreseeable future. “Commercial loan rates have always been a bit higher than residential, due to the fact that they are investment properties and are inherently riskier,” explained Withers. “Still, we’re seeing very low rates averaging between the high three’s and four’s.”

Because commercial investments are reliant on income from tenants, there was a lot of speculation about the commercial real estate market that the pandemic would cause massive vacancies. “There were gloom and doom forecasts for the commercial market, but so far, I haven’t seen a lot of distressed situations,” said Withers. “Lenders have been willing to work with borrowers because most lenders don’t want to have to foreclose and be stuck with properties.”

In many cases, lenders will help clients put together a plan, which sometimes involves repurposing the properties. Restaurants and bars, among the hardest hit by the pandemic, are now slowly starting to come back. “Now that we’re seeing a huge volume of people vaccinated, I think you’re going to see more restaurants opening back up, as well as retail stores,” Withers said.

Concerning office space, Withers noted that many employers are offering people more flexible schedules with the ability to work at home a few days a week. “Actually, Realtors have had this business model forever—the most profitable real estate offices are those where most of the people are not in the office all the time,” he added.
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M1 Capital works with clients throughout the New York metro area, providing financing for all types of commercial venues including apartments, condominiums, hotels, retail outlets, office complexes, restaurants, storage facilities, warehouses and much more. His firm also handles renovation loans and refinancing.

Most recently, Withers has been very busy in the Bronx and Yonkers, with new construction projects starting to resurface. His focus is on loans from $1 million to $25 million. “As far as business is concerned, I honestly think it’s going to get even better,” he admitted. “I also believe the interest rates will stay low until the end of 2022. The Fed has signaled they’ll work to keep the rates low so they can keep the economy rebounding.”