Highlights from the Boston Real Estate Now blog.
Already difficult, landing a mortgage may actually get a lot harder before it gets easier.
We all know the downside now of rising interest rates.
Home buyers are in love with rock bottom interest rates, which, at least in theory, have significantly increased their purchasing power. (OK, low rates have also helped reinflate home prices, so it may be more of a wash than many buyers would like to admit.)
And the recent, steady escalation in interest rates has sent some buyers into a panic, hustling to find a property to sign the dotted line on before the Fed-bankrolled gravy train ends.
But buyers are not the only ones scrambling to protect their backsides as rates head up. Bankers are, too. And buyers may soon find that mortgages, already hard to come by, may also get tougher as rates head back up.
After all, your local banker is definitely not in love with today’s crazy low interest rates. In fact, the last thing a lender wants to do right now is bulk up on 30-year mortgages with minuscule interest rates, especially if higher rates, and more profitable loans, are just around the corner.
So while higher rates may eventually boost mortgage lending, as rates begin what is likely to be a long, slow upward rise, banks may actually tighten up on their lending.
After all, no bank wants to be the sucker here, settling for a lower rate when simply waiting can produce a bigger payday.
And for your typical banker, the easiest and most natural thing in the world is to do nothing anyway, whatever the reason.
Here’s how New York Times business columnist Gretchen Morgenson lays it all out in a recent piece.
“A coming shift by the Federal Reserve in its quantitative easing program may also be curbing banks’ appetite for mortgage loans they keep on their own books. These institutions are hesitant to make 30-year, fixed-rate loans before the Fed shifts its stance and rates climb. For a bank, the value of such loans falls when rates rise. This process has already begun — rates on 30-year fixed-rate mortgages were 4.4 percent last week, up from 3.35 percent in early May. This is painful for banks that actually hold older, lower-rate mortgages.”
The rising cost of buying condominiums in Southie
Would you pay nearly $1,000 a square foot to live in Southie?
Well the buyer of a 2,025-square-foot penthouse in the Macallen building on Dorchester Avenue has apparently decided it’s worth paying a Back Bay price to live in the neighborhood.
The two-bedroom, 2½-bath condo, with panoramic views of downtown Boston and the harbor and a large rooftop terrace to relax in, just fetched $1,945,000.
That’s $960 a square foot, according to Coldwell Banker, which brokered the deal.
We are talking about Back Bay prices.
Per square foot, it is one of the highest prices ever paid for a condo in South Boston or the nearby Seaport District, home to Fan Pier, the Institute of Contemporary Art, and Fort Point’s picturesque Victorian-era granite warehouses, now funky offices and loft-style condos.
The $960 a square foot sale price could be an anomaly — or a sign of things to come amid scarce listings in Boston’s luxury condo market.
A surge of downtown high-rise construction during the bubble years left a glut of multimillion-dollar units after the economy and real estate market hit the skids, but all those empty condos are now long gone.
Of the top five condo sales in South Boston and the Seaport since 2007, two were Macallen building units that fetched just over $2 million each. But the price per square foot was significantly lower, in the $700s, not the high $900s, Coldwell Banker says, citing LINK.
A penthouse unit at FP3 in one of those converted, grand old Fort Point warehouses went for more than $3 million, but the price per square foot was $753 a square foot.
A condo at Channel Center, a modern high-rise in Fort Point, sold for more than $2 million, but the price per square foot was just under $600, according to the brokerage firm.
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues. For the full Boston Real Estate Now blog, visit www.boston.com/realestate.