Dear Investors and Partners,
The Fed’s interest rate cut was the most significant event in the third quarter of this year. As I have mentioned multiple times, it will take time for the Fed to lower rates to its target and for the economy to respond fully. I also noted last month that, immediately following the Federal Reserve’s first interest rate cut in years, the 30-year and 15-year mortgage rates experienced a slight increase. Since then, mortgage rates have continued to rise. Currently, the 30-year mortgage rate stands at 6.44%, the highest level since August, while the 15-year rate has climbed to 5.63%.
What accounts for the rise in mortgage interest rates despite the Federal Reserve’s interest rate cuts? While the Fed can influence mortgage rates, it does not directly set them. Instead, mortgage rates are primarily affected by U.S. government bond yields, which have recently increased for several reasons. One factor is investors’ expectations for a more cautious approach to future Fed rate cuts. Additionally, banks and other credit providers are leveraging the decline in interest rates to maintain or even boost their profit margins, which has kept average rates for high mortgages elevated. Moreover, uncertainty surrounding the upcoming U.S. elections in November contributes to the situation. Regardless of the outcome, the prevailing uncertainty tends to prompt a “wait-and-see” attitude among investors. As a result, mortgage interest rates remain high, leading to a notable decline in the number of weekly mortgage applications.
In the second week of October, applications for new homes fell by 7%, although they remain 7% higher than this time last year. Refinance demand, which is particularly sensitive to weekly rate fluctuations, saw the largest drop, falling 26% week-over-week. However, it remains 111% higher than the same week last year, as rates were 118 basis points higher at that time. This means that anyone who purchased a home last year could potentially benefit from refinancing now. The share of refinance applications has also dipped below 50% for the first time in over a month. Despite the recent increase, mortgage rates are still more than a full point lower than they were a year ago, as investors anticipated the Fed’s rate cuts and incorporated those expectations into the 10-year Treasury yield.
High interest rates over the past two years have driven down purchase prices in the commercial real estate market due to elevated borrowing costs. Nationally, property prices have decreased by 19% since their peak in 2022, which has sparked renewed interest in potential deals. Following the Fed’s rate cut, market activity has increased as property owners look to minimize losses and seize new opportunities, particularly as the Fed’s decisions bring greater clarity to valuations. Transaction volumes are on the rise, with lenders reporting more bids for loans and property sales. Major banks are becoming more willing to finance transactions, leading to heightened competition—properties that garnered few offers just a few months ago are now attracting multiple bidders.
In Q3 2024, New York City saw a total of $2.33 billion in multifamily sales. After a robust Q2, the multifamily market slowed in the third quarter, with dollar volume declining by 17% quarter-over-quarter to $2.33 billion and transactions dropping by 16% to 248, according to Ariel Property Advisors’ Q3 2024 Multifamily Quarter in Review. While these figures may appear discouraging, they should be viewed in context. For instance, in the same quarter last year, sales totaled only $1.55 billion, and the decline from Q2 to Q3 in 2023 was even sharper. Additionally, the lending environment this year has been stricter than last year, yet there remains a greater sense of confidence in the market.
The rental market in New York continues to rise, with a median rent of $3,419, reflecting a 2.7% increase from September of the previous year. In contrast to the overall declining trend seen across the top 50 markets, the median asking rent in NYC continues to rise annually. Although NYC experienced some of the steepest rent declines during the pandemic, its median asking rent rebounded to pre-pandemic levels by Spring 2022 and has risen consistently since then. As of September 2024, the median asking rent in NYC was $344, or 11.2%, higher than the same time in 2019.
In September 2024, the median asking rent for all rental units in Manhattan was $4,471, a decrease of $58, or 1.3%, from a year ago, marking the fifteenth consecutive month of annual declines. In contrast, rents in the Bronx, Brooklyn, and Queens—the three relatively lower-rent boroughs—continue to rise annually. Among these, Queens experienced the fastest annual rental growth in September, with the median asking rent reaching $3,353, up $277, or 9.0%, from last year, and $874 (35.3%) higher than five years ago. Meanwhile, the median asking rent in the Bronx increased by 6.0%, or $175, to $3,106 from a year ago, reflecting a $1,092 (54.2%) rise over the past five years. In Brooklyn, the median asking rent rose by 2.2%, or $78, to $3,695, marking an increase of $938 (34.0%) over the past five years.
Since its inception, the Golden Bridge Fund has concentrated on issuing loans backed by real estate assets, primarily residential properties in New York City. Our primary focus has been on the markets of Queens and Brooklyn, although in recent years, we have also increased our exposure to loans in the Bronx. This strategy is underpinned by the growing demand for housing in the New York metropolitan area. The outer boroughs, along with neighboring New Jersey to the west, are well connected to Manhattan by transit, positioning them to benefit from their proximity to one of the world’s largest business, cultural, and entertainment hubs.
Erez Britt, Founder and CEO
See below links to Golden Bridge fact sheets:
Example of a recent loan funded:
1150 Metropolitan Avenue Brooklyn, NY
Last month, Golden Bridge secured a $12,980,000 loan with a first-position lien to refinance a fully leased warehouse complex in Brooklyn, NY. This six-unit complex spans 83,600 square feet and is conveniently located just minutes from the main highways connecting all five boroughs. Its strategic position makes it an ideal “last mile” property, situated near both shipping ports and airports, as well as serving as a distribution hub for a densely populated area. Golden Bridge is deeply familiar with the property market in Williamsburg and has been actively involved in financing deals across various property types in the surrounding neighborhoods. After conducting thorough due diligence on both the borrower and the property, we structured the loan and its accompanying fees to maximize returns for our investors.
Loan Amount: $ 12,980,000
Property Value (As Is): $ 30,200,000
LTV As Is (loan to property value ratio): 43%
Loan Duration: 12 Months
Reminder that it is possible to see the fund’s loans on New York City’s website:
https://a836-acris.nyc.gov/DS/DocumentsSearch/PartyName
(Business party name: Golden Bridge)
For additional information, don’t hesitate to contact us.