Trump’s NYC Property Impact

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Summary:

• Introduction & Market Overview
• The Rate Environment
• Tariffs & Economic Impact
• Expert Market Analysis
• The NYC Mortgage Market
• Market Response & Opportunities
• Tax Policy Changes
• Looking Forward

As we look toward a new Trump administration, NYC real estate investors face a complex landscape shaped by two critical factors: tax policies and tariffs. Recent market dynamics provide crucial context for understanding what lies ahead.

The Current Rate Environment

Despite the Fed’s recent aggressive moves – a 50-basis-point cut in September followed by a 25-basis-point reduction – mortgage rates remain stubborn in the mid-6% range. This persistence reflects both economic strength and market uncertainty about future policy changes. The 10-year Treasury has been climbing since mid-September, suggesting mortgage rates may resist following the Fed’s downward trajectory.

Tariffs and Their Market Impact

According to economists, Trump’s proposed protectionist tariffs could trigger inflation immediately upon implementation in January 2025. With no legislative hurdles in sight, these policies could maintain current rate levels or push them higher. However, market experts see potential benefits in this stability.

Expert Perspectives

Frank Cronin, Senior Lending Mortgage Officer at Citibank, sees opportunity in the current environment: “Steady rates have the potential to be a ticket to a strong economy with high employment supporting an increased qualified buyer pool.” During our recent conversation, Cronin noted that buyers continue to move forward despite election uncertainty and market fluctuations, suggesting this stability could end Manhattan’s price erosion, ongoing since 2023.

The Mortgage Reality

With half of NYC property buyers dependent on mortgages, particularly first-time homebuyers, the rate environment remains crucial. Sarah Alvarez, Vice President at William Raveis Mortgage, LLC provides critical insight: “The Fed’s rate cuts have done little to calm the market fears of increased federal deficit which are in return driving bond yields way up, as of today the 10-year treasury is around 4.31% the highest since July. Mortgage rates, which closely mirror the movement in the bond market, are also up and it will take longer for interest rates to return to their pre-pandemic norms than people had initially anticipated. The silver lining is at least we are down from when rates were closer to 8% last year. The simple answer is it remains a matter of when — not if — rates will come down but there are sure to be some surprises along the way.”

Market Response and Opportunity

Higher mortgage rates have consistently pressured prices downward over the past six quarters. However, recent data shows price moderation and healthy transaction volume. Smart buyers are recognizing a key principle: while financing terms are temporary, purchase prices are permanent.

This strategic thinking explains recent market strength, particularly in luxury properties. September saw a surge in signed contracts for $5M+ properties, marking the second-strongest September in a decade.

Tax Policy Implications

Trump’s proposed tax policies add another layer of complexity. The SALT deduction cap, set at $10,000 under his previous administration, expires next year. This cap particularly impacts New York City homeowners, where living costs significantly exceed national averages.

According to The Real Deal‘s research, when the new limit was set at $10,000, the market paused to assess the damage, causing a temporary slowdown. Two years later, it was largely forgotten, and business continued as usual until the pandemic disrupted everything. By 2021, houses were selling well above asking without inspections, and the SALT deduction minimum had become a distant memory.

Looking Forward

The combination of proposed tax policies and deficit spending suggests bond yields will remain elevated, making lower mortgage rates increasingly unlikely. However, current market activity indicates that buyers are adapting to this new normal, particularly in the luxury segment where strategic opportunities exist despite higher borrowing costs. With the expiration of key tax provisions and new policies on the horizon, 2025 promises to be a pivotal year for NYC real estate.

If you are thinking of selling or buying NYC real estate in 2025, here are some important considerations.

FAQ

Can I transfer my low interest mortgage rate to the purchaser?

Sadly, you cannot although I have been challenged on this point by one attorney who claims he was able to do it. The truth is it is nearly impossible but what you can do is offer a purchase CEMA (Consolidation, Extension and Modification Agreement). It will not lower the buyer’s mortgage rate, but it will save them a considerable amount on their closing costs as the mortgage recording tax is 1.925% for mortgages above $500,000.

Should I wait for rates to come down before I purchase?

If you can afford to purchase the home you want today even if it is a bit of a stretch, it is advisable as prices have come down in New York City over the past eighteen months. The controversial saying, “date the rate and marry the house” applies more today than ever. You can refinance but you cannot change your purchase price. Savvy buyers know this, which is why there have been so many cash purchases this year.

What can I do to get a better rate?

“In a steady rate environment, the key to secure advantageous financing is understanding how to use assets to qualify for a below market rate and the events that drive the 10 Year Treasury Yield.” according to Frank Conin. The best rates are given to those with excellent credit and a relationship with the bank. For example, right now a $200,000 deposit with CITI Bank reduces the market rate by a .25% according to Cronin. Banks are always changing their offerings depending on the market so check with your favorite bank or mortgage broker to find out what relationship offerings best match your financial situation.

Also ask for a free float down. If you are purchasing at a time when you think rates might come down, you may be able to take advantage of a lower rate when you close should it differ from the one you originally locked in.

When should you refinance?

The conventional wisdom is you should refinance when you can reduce your rate by a full percentage point.

How can I buy now in NYC without a large downpayment?

I recently wrote about a midtown East condo building, The Perrie, that accepts FHA loans. These loans only require 3.5% down. This is an ideal opportunity if you want to lock in a lower purchase price but do not have the 10-20% down payment in cash you need for a typical Manhattan condo.

Reach out today. I would be happy to help to find your home.