Each month, the Federal Reserve Bank of New York reports on home prices as compared to the previous year. Each year since at least 2012, the prices of homes throughout New York City were found to be higher than they were the previous year. As of December 2016, home prices in Queens were 9.2% higher than the year prior. In Brooklyn, that percentage increase was 4.8% and in the Bronx it was 3.1%.1 According to one industry publication, the average sales price of coops and condos in Manhattan was over $2.05 million in 2016, up 12% from the previous year and up 52% from the prior decade. The median sales price was $1.1 million, up 8.9% from the year before and up 28% from 2007.
At the same time, mortgage interest rates have been relatively low for many years, hovering between 3.5% and 4.5% for the past four years. This combination of increased equity and low interest rates likely contributed to the refinance boom nationwide in 2012, but they dropped off sharply in 2013 and continued to decline into 2014, only starting to come back again in 2015 and 2016.
From 2014 to 2016, home purchase lending increased nationwide. In New York City, it increased by 8.6% (up 4.8% in 2015, then another 3.1% in 2016).3 Unlike the decline in the prior three years (2012 to 2014), lending to lower-and moderate-income (LMI) borrowers also increased from 2014 to 2016. Lending increased 6.3% in 2015 and then another 1.8% in 2016, exceeding 2012 levels slightly. In 2012, 9.3% of all home purchase loans went to LMI borrowers, but that dropped to 8.2%, 8.5% each year from 2013 to 2016.
Given the high cost of entry to homeownership in New York City, and the displacement pressure on lower-income homeowners in many neighborhoods, refinance and home improvement loans can provide critical sources of capital for lower-income borrowers to remain in their homes. HMDA-reportable refinance loans increased over 26% from 2011 to 2012, and then declined 67% from 2012 to 2014 (down 52% to lower-income borrowers). Refinance lending has been increasing steadily since then, but it is not yet near 2012 levels overall and to LMI borrowers in particular.
Home improvement loans followed similar trends, peaking in 2013, dropping in 2014, and rising since then. The number of loans in 2016 exceeded 2012 levels. We also recognize that HMDA does not capture the totality of home improvement loans, but it is the only public data we have and it is important for banks to offer this product to allow homeowners to maintain their homes over the long term.