COVID, Optimism & Mortgage Rates: Pulling the Strings on the New Development Market

After roaring back from pandemic lows, new development absorption peaked in April 2022 and subsequently began a slow reversion towards the mean for the remainder of the year:

However, mortgage rates began to rise rapidly at the beginning of 2022, acting as a motivator to draw in future demand and rev up the absorption engines once again:

But, at approximately 4.72%, mortgage rates transitioned from motivator to deterrent and quickly tapped the brakes on new development absorption:

After 74-consecutive weeks above the pre-COVID long-term average, new development absorption has finally pulled back to that average. But this is not a pessimistic ending to the story that dominated industry headlines in 2021. Far from it. Even in a normal market, reversion to the mean is mathematically expected and, moreover, healthy.

However, we are not in a normal market and that’s what makes this story an uplifting one — a morale boost for those consumers and professionals participating in the new development space. Despite record acceleration in mortgage rates; despite inflationary fears; despite a terrible war; despite a routing in the crypto market and despite a correction in the equities market, NYC’s new development market is still on par with its long-term average of 54 contracts per week.

PLEASE NOTE: all mortgage rate data courtesy of https://fred.stlouisfed.org/series/MORTGAGE30US