Many people dream of moving to New York City (NYC) and enjoying the vibrant lifestyle of the Big Apple. In addition, this destination has a rich culture, and residents can find many business and job opportunities there.
The New York housing market has always been robust. Many potential buyers from all over the US – and a few from other countries – are interested in local real estate properties.
However, like other cities, the Big Apple has been hit by the pandemic and rising inflation. Therefore, many homebuyers and real estate investors are still unsure if buying a property in NYC could be a good decision.
If you're part of this group, don't worry! Here's all the information you need to understand the New York City housing market and determine if it's a good place to invest your hard-earned money. Read on!
Housing Market Trends in New York City
Redfin's latest reports showed that the housing market in New York City has experienced price drops since 2022. However, home values are still high compared to the national average sales price.
Also, over 1000 fewer housing units were sold in April 2023. Does that mean fewer people are interested in buying a property in this city? Or does this drop in sales suggest that inventory is not meeting demand?
Let's learn more about these trends to understand how the NYC real estate market behaved during the past few months.
According to Redfin's April 2023 data, home values fell by 3.7% year over year to $790,000. However, although the median sale price is lower, that doesn't mean the market has lost competitiveness.
Actually, the April 2023 median sales price is higher than in March, February, and January of this year. Additionally, it has hovered between $750,000 and $850,000 since March 2021, which means that changes in property values have not been significant.
Redfin's reports also showed that the number of homes sold in New York City fell by 33.95 in April 2023. Only 2,214 housing units were sold this month, down from 3,347 in April 2022.
The latest home sales volume is also lower compared to the figures reported in March 2023, which means fewer housing units have gone under contract in the last 30 days.
According to the New York State Association of Realtors, the number of closed sales fell to its lowest level in the last 10 years. In addition, home supply is 8.2% below February 2022 inventory.
Housing Demand and Supply
Demand for homes in NYC grew considerably as mortgage interest rates fell to record lows between 2020 and 2021.
However, homebuyers have been priced out of the market as interest rates rise again. As a result, the inventory has started to increase slowly, reaching a 5.1-month supply in January of this year.
The latest reports showed that there were 25,863 homes for sale in New York City in March 2023.
Median Days on the Market
Currently, homes in New York City spend at least 151 days on the market before going under contract.
According to Redfin, the median days on the market in New York state is 99 days after a 22-day year-over-year rise.
Factors That May Influence the NYC Housing Market
Different factors can affect the city's housing market, including the economy, government policies, and demographics. Find more information about each one below.
New York City's Economy
New York City is known for offering many business and job opportunities, but it's quite expensive compared to other destinations across the United States.
Currently, the city is the country's largest municipal and regional economy despite experts predicting that revenues would fall by 0.37% between 2023 and 2024.
Additionally, New York City has a robust job market, which has recovered considerably after the pandemic.
According to the latest figures from the US Bureau of Labor Statistics, nearly 10 million people in the New York City metro area are employed. That's 344,000 more jobs than in December 2021.
Plus, the New York City metro area added 4,400 new jobs in the construction sector alone over the last year. Overall, the industry employs 46,000 people.
The unemployment rate in this city, which is another key economic indicator, is 3.8%, which means most residents have stable jobs.
Why are these economic factors important? Well, a city's economy defines the local housing market. More people will buy houses if they have ample cash and are confident in their income.
Local Government Policies
The New York City real estate market is also affected by local legislation. Tax credits, deductions, and subsidies can define housing demand and prices.
Actually, many local governments control these trends through tax policies.
Changes in Demographics
The composition of the population can also give you a better idea of a city's housing market. In addition, changes in demographics can influence housing demand, inventory, and prices.
As mentioned, New York City attracts many people from other states and countries. That's one of the main reasons it has a strong rental market.
According to Redfin, about 3% of homebuyers were planning to move from other major cities to the Big Apple between February and April of this year.
Additionally, 72% of people living in New York City expected to stay within the metropolitan area, while only 28% of residents wanted to move to another destination.
Mortgage Interest Rates
Mortgage rates also have a major influence on a city's housing market. If they're rising, getting a loan will be much more difficult. As a result, people are unwilling to buy a home, and demand falls.
However, obtaining a loan to buy a property is much easier when interest rates are low, which drives housing demand and prices up.
In the United States, mortgage rates have reached record highs, which has made property costs unaffordable for many people. Consequently, as the number of potential homebuyers has dropped, demand and prices have plummeted as well.
Is the New York City Housing Market About to Crash?
Many have predicted that the United States would face a mild recession soon. As a result, homebuyers and real estate investors are hesitant to invest in the New York City housing market.
However, experts say the market will only experience a slowdown and won't crash as many fear. These facts show that it's unlikely to happen:
- The inventory is low. Although there are many houses for sale, the supply must be excessively high to cause the real estate market to crash. Currently, New York City has enough housing units for around four months.
- Buyer sentiment is high despite economic uncertainty. Although sales have also fallen, many people are still interested in purchasing a house in this city.
- The demand for housing units in New York City is high, which means that inventory will remain low throughout this year.
- Home builders aren't building enough new properties. Since getting permission to buy land and build houses is increasingly challenging, the supply of newly constructed homes is still low.
- Even if construction companies start building houses now, the number of units won't be enough to meet the demand.
- Foreclosures have fallen across the country. People feel more confident about their finances and have more equity in their properties. As a result, foreclosures have dropped. Therefore, a foreclosure crisis isn't on the horizon.
- Lenders are stricter. Since borrowers must meet more requirements, getting a loan is more difficult. Therefore, there is no fictitious purchasing power altering housing demand and prices.
New York City Housing Market Statistics
Besides considering the latest trends seen in New York City, it's also important to consider the following statistics to make a wise real estate investment decision.
- Black Knight's latest market data show that less than 1% of New York properties were in foreclosure as of December 2022.
- The February 2023 market report by StreetEasy revealed that the number of new in-contract listings in New York City rose by 32% compared to January figures.
- According to StreetEasy, the average home for sale in NYC receives 9% more offers from potential buyers than in 2022.
- NeighborhoodScout's latest data on the NYC housing market showed that the cumulative appreciation rate over 10 years was 79.16%.
- The annual average real estate appreciation rate in NYC is 6.00%.
- A few neighborhoods in NYC have higher median listing prices, including Tribeca ($4.3 million per home).
- Pending sales in the New York real estate market (statewide) fell by 16.7% to 105.
- The average sales price, which is different from the median sale price, was $505,895 after a 3.4% drop, according to Norada Real Estate Investments.
Experts' Predictions About the NYC Housing Market
Do you want to know what the experts think about the NYC real estate market? Here are the most important predictions!
Rising Mortgage Interest Rates
Experts believe that mortgage interest rates will continue to rise this year, reaching as high as 8% for 30-year, fixed-rate loans.
Rising interest rates would result in a drop in demand and housing prices since difficulties in obtaining a loan would discourage potential homebuyers from purchasing a property in this city.
Falling Home Prices
If there are fewer buyers and lower demand, home prices will fall. Experts believe this will result from high mortgage interest rates, which will make homes look unaffordable.
Declining Home Sales
Analysts also expect home sales to continue to fall this year, as rising interest rates will make it much more difficult to buy a home.
Most experts believe the number of home sales in NYC will drop by at least 10% between 2023 and 2024.
New York City Housing Market Forecast
New York City offers many benefits to homebuyers and real estate investors, from many job opportunities to a rich culture and incredible entertainment venues. That's why builder confidence and consumer sentiment are rising.
However, there's still a question to answer: What will happen to the New York City real estate market?
Experts say the New York real estate market is one of the country's strengths. There are always many people interested in rental properties, and many homebuyers from other states and other countries want to find the perfect home there.
However, many believe the high costs to rent and buy a property will cause the market to cool off later in 2023.
In addition, Zillow issued its latest forecast for the New York-Newark-New Jersey City metro area, saying home prices will fall next year if the Fed raises interest rates.
However, in the New York metro area, home values could rise as much as 0.1% by March 2024, Zillow predicts.
Many still wonder if NYC is a good place to buy a property, but it's important to know that it depends on each person's budget and preferences.
Compared to other cities, NYC has high home values. Also, even though they'll likely drop slightly this year, people shouldn't expect big price decreases.
If you want to know if the Big Apple is ideal for your real estate investment, carefully analyze the latest trends and consider your personal situation. You can also contact an experienced real estate agent for guidance.
Frequently Asked Questions
Is New York a Seller's Market?
No, it isn't. Since there are many housing units for sale, the current market benefits buyers over sellers.
Can Buyers Negotiate Home Prices in New York City?
Buyers have more negotiation power as housing inventory rises and home values fall. However, many sellers are reluctant to lower prices because housing demand is still high.