New York offers top-class entertainment, engaging culture, and multiple business opportunities, attracting homebuyers from all over the world. As a result, the state's housing market has remained strong.
However, the local real estate market has been struggling due to rising interest rates, low inventory, and a drop in home sales.
In addition, the New York housing market suffered due to the Covid-19 pandemic. Luckily, it's showing signs of recovery.
Since there are still fluctuations, many people wonder if the New York real estate market will crash soon. What do experts say? What should homebuyers and investors expect? Read on to find all the answers you're looking for!
In March of this year, home prices were slightly up across New York, mirroring most of the trends seen in January.
Residential properties sold for a median price of $490,300. However, home prices are down 8.1% compared to last year's figures.
Based on March 2023 reports, the number of houses sold was also lower year over year, with just 9,021 units purchased, down from 12,756 in March 2022.
Additionally, homes spent more time on the market before potential buyers and sellers signed a purchase contract, with a median of 60 days.
New York Housing Market Trends
The latest housing report released by the New York State Association of Realtors showed that closed sales fell to the lowest level in nearly a decade.
Sellers have been struggling to find interested buyers even though consumer sentiment has improved slightly in the last two years. Also, there are fewer houses available for sale. New listings decreased by 24% year over year.
Although home prices fell slightly, the median days on the market rose, showing that the real estate sector is losing competitiveness.
Do you want to learn more about the latest New York housing market trends? Find more information below.
New York Median Home Prices
As mentioned, the median price of a house in New York fell by 8.1% compared to last year's figures, reaching $490,300.
Although the positive trend continues, with the median price rising slightly since January of this year, it's still $42,900 below the median price reported in March 2022.
The number of homes for sale has also fallen considerably. In March of this year, there were 45,260 units available, down 9.37% year over year.
Additionally, there are fewer new listings, with only 14,502 units listed in March, which accounts for a 24.0% year-over-year drop.
On average, there are only four months of supply.
The latest reports also showed that the number of homes sold dropped from 12,756 in March 2022 to 9,021 units in March of this year.
In February 2023, only 7,328 houses were sold, which accounted for a 33.4% drop compared to January of this year. Therefore, March reports show an increase of 1,693 units sold in just 30 days.
However, the number of homes sold reported in March 2023 is still below last year's figures. In August 2022 (the highest point), 16,159 units went under contract.
Almost 30% of homes in New York sold above list price in March 2023, down 5.7 points year over year.
Additionally, 20.3% of residential properties had price drops, up from 17.0% of houses listed in March of last year.
The latest reports also showed there was a sale-to-list price ratio of 99.1%, down 1.1 points year over year.
Median Days on the Market
How long were homes on the market before going under contract in New York? According to March 2023 reports, the median days on the market was 60 days.
Although home prices have fallen and the number of units sold has increased since February, residential properties have been on the market for longer.
The median days on the market rose from 30 days in August 2022 to 60 days in March of this year.
Factors Affecting the New York Real Estate Market
Multiple factors may affect the New York housing market, including the state's economy, employment trends, demographics, mortgage interest rates, and government policies. Here's more information on each category:
In New York, the overall health of the economy always affects the housing market. These are a few indicators to consider:
- Prices of goods
- Employment ratio
- Gross Domestic Product (GDP)
- Manufacturing activity
If the economy is sluggish, the real estate sector struggles. In addition, there's a correlation between the housing market and consumer spending.
When houses' value goes up, homeowners feel more confident about their financial situation and often use the equity in their properties to take out loans. They usually spend that money on renovations, new furnishings, and appliances.
Encouraging consumer spending also leads to higher economic growth. Therefore, housing is considered a primary sector of New York's economy.
The Covid-19 pandemic brought many challenges and dramatic changes. However, New York has shown signs of recovery.
According to NYC Comptroller Brad Lander, the economic patterns are largely stabilizing. Employment has returned to 99.5% of pre-pandemic levels as workers and employers adopt hybrid schedules.
Affected industries, including accommodations and food services, have also reported improvements.
The real estate and job markets are also correlated. Preliminary figures released by the New York State Department of Labor showed that the unemployment rate held steady at 4.2%.
Additionally, the number of jobs in the private sector increased by 0.3%, or 21,200, month over month, reaching 8,233,700 in February of this year.
Since their relationship is correlative, the job market grows if the real estate market rises. Also, when one of them falls, so does the other.
Mortgage Interest Rate
The real estate sector is also affected by mortgage interest rates, which have priced many buyers out of the housing market after reaching record highs.
On May 3, 2023, the national average APR for a 30-year fixed-rate loan was 7.011%, which accounts for an increase of 11 basis points in one week.
According to Redfin, the average APR for a 15-year fixed-rate mortgage rose 15 basis points in one week, reaching 6.228%.
After an increase of 12 basis points, the average APR for a 5-year Adjustable Rate Mortgage (ARM) was 6.095%.
The composition of New York's population in terms of gender, race, income, age, growth, and migration patterns also influences the real estate market.
Demographics can help New York homebuyers and investors determine the type of properties that are in demand.
Additionally, major changes in a state's demographics also influence the local housing market trends.
According to Redfin's reports on US migration trends, New York was one of the top 5 states that homebuyers searched to move from between January and March of this year.
Other government-related factors can impact the housing market, particularly the demand for real estate properties.
New York has unique laws on real estate purchases. Additionally, property taxes vary significantly between New York City and the rest of the state.
Investors should understand government policies to predict demand and supply, which can help them make better purchasing decisions.
Is the New York Housing Market Likely to Crash Soon?
Many are concerned about a potential real estate market crash. However, experts predict that there will only be a drop in prices.
Here are five reasons why the New York housing market is unlikely to crash:
Different factors can cause a housing market crash, including the oversupply of homes.
However, March 2023 data showed that there's a four-month supply available in New York's housing inventory.
Although the number of homes sold has fallen, experts say that customer sentiment has improved. As a result, there's still a strong demand for residential properties in this state, which results in low inventory.
Low Supply of Newly Constructed Houses
There are fewer newly built houses on the market. In fact, the supply is still below pre-2007 levels. Therefore, the inventory remains low.
Strict Lending Standards
Although most lenders didn't conduct credit checks or request down payments to grant mortgages in 2007, lending standards are now stricter.
Borrowers must have excellent credit scores and meet other strict criteria to get loans and buy real estate properties.
Most homeowners have stronger personal balance sheets and significant equity in their houses, which means there is less risk of a foreclosure crisis.
New York Housing Market Statistics
If you want to make informed decisions about your next real estate investment in New York, check out the following statistics!
- The Housing Affordability Index fell from 126 in February 2022 to 105 in March of this year after a 16.7% drop.
- In New York, pending sales were down 8.1%, reaching 8,593.
- The average sales price of a home in New York fell by 3.4% to $505,895.
- On average, sellers receive 98.4% of the home's original price once the property is sold, which accounts for a 1.5% drop compared to last year's figures.
Housing Market Predictions
Based on experts' opinions, these are the predictions for the housing market in 2023:
Mortgage Interest Rates
Analysts expect mortgage rates to rise to 8.50% for a 30-year loan and 7.70% for a 15-year loan in response to continuous inflation and a potential recession.
However, many experts believe that rates could drop to 6.0% and 5.25%, respectively, if the Fed controls inflation.
Lower Home Prices
Other experts predict that home prices will remain unchanged this year. However, several analysts believe sellers will be forced to lower their properties' prices due to higher interest rates.
Overall, analysts expect house prices to fall by 5-10% due to less affordability.
Rising mortgage rates will likely result in fewer home sales. Experts predict that the drop could be as high as 10%.
Before the housing market crashed in 2008, the supply reached a record high of 13 months. However, New York has enough houses for just four months.
Several experts predict that high mortgage rates will make homes unaffordable. As a result, inventory may rise.
New York Housing Market Forecast
The National Association of Realtors predicts that interest rates will decrease by late 2023. This could lead to higher demand for homes.
However, many experts say the New York housing market will continue to struggle this year due to low inventory.
Many see the New York market as a great place to invest in. However, it has been red hot since the Covid-19 pandemic hit the country.
Home prices are falling, real estate sales are lower, and there isn't enough supply. In addition, investors are struggling with rising mortgage interest rates.
Experts say that house prices will fall but insist that the drop won't be huge. Also, most New York homeowners have stronger balance sheets.
Due to the constant fluctuations, predicting what will happen to the New York housing market in the coming months is challenging. However, there are still good investment opportunities for many.
Frequently Asked Questions
Should Investors Consider Buying Real Estate in New York?
New York's rental market is still strong, but home sales have fallen considerably. If you want to know if buying a property in this state is a good idea, don't hesitate to seek expert guidance.
Is New York a Seller's Market?
Based on the latest trends and statistics, New York is a buyer's market as of March 2023.
Will Home Prices Continue to Fall?
According to experts, home prices will continue to fall if mortgage rates continue to rise.