We’ll be discussing the current state of the NYC real estate market as well as the statewide data. New York City is among the most expensive and competitive housing markets in the nation. It has also been among the most hard-hit by the COVID-19 pandemic. However, buyers have made a swift comeback since the reopening of the economy this summer, which led to a busy fall home-shopping season.
The current trends show that the New York housing market continues to be hyperactive in cold weather with sales higher than normal levels. The New York real estate market (statewide) continued to be sizzling hot in October 2020 with both sales and prices increasing by double digits as compared to last year.
The closed sales increased by 16.6 percent from 12,853 units in October 2019 to 14,981 last month while pending sales skyrocketed by a 38.8 percent increase from October of last year, according to the housing report released by the New York State Association of REALTORS®.
Housing inventory remained low through October. Active listings decreased by 20.9 percent compared to last year at the same time. Months supply of inventory dropped 23.2 percent – from 5.6 months to 4.3 months. The statewide median sold price in New York increased by 24.5 percent to $340,000 in year-over-year comparisons. The average sold price also increased from $362,572 to $441,020 – an increase of 21.6 percent year-over-year.
Now let’s talk about New York City which has been the epicenter of the pandemic. The fallout from the pandemic has led to people moving to suburbs, bidding up home prices in those places. On the other hand, those sticking around in the city have often been able to find a better home for less. Manhattan home prices have dipped, while Brooklyn is defying gloomy economic conditions with a competitive scene that continues to push real estate prices higher.
The NYC real estate market is currently a buyer’s market which means there are roughly more active homes for sale than there are buyers. The supply for housing is outpacing the demand favoring home buyers who are managing to hold good leverage in price negotiations.
Data by Redfin.com shows that the average sale price of a home was $630K last month, up 2.4% since last year.
The average sale price per square foot in New York is $392, up 1.6% since last year.
Homes for sale in New York have a median listing price of $875K.
Most homes for sale in New York stay on the market for 135 days and receive 3 offers.
Realtor.com’s data also shows that NYC is a buyer’s market.
In October 2020, the median list price of homes in New York, NY was $850K, trending up 2.5% year-over-year.
The median sale price was $670K.
Homes sold 2.59% below the asking price on average in October.
Sale-to-List Price Ratio was 97.41%.
Ideally, a buyer would prefer a sale to list price ratio that’s closer to 90% whereas a seller would always prefer scenarios that can yield a ratio of 100% or higher.
On average, homes in New York City sell after 122 days on the market.
The trend for median days on market has gone down since last month, and slightly down since last year.
By Redfin.com
People are leaving big, densely populated areas like New York City and spreading out to suburbs or smaller communities with lower infection rates and/or to save money. Over the past several months, there’s an influx of renters in the Hamptons coming from New York City. Hampton is roughly 100 miles from New York City and Brooklyn — the top two cities that experienced the highest amount of net losses.
New York City experienced the highest losses — more than 110,000 residents left the city from February to July of this year. That’s 487% growth (or nearly five times) when compared with the number of outgoing movers that left Manhattan in 2019. Brooklyn ranked sixth last year, but numbers quadrupled in 2020, pushing it to second place. What could be causing the large migrations during the key months of the pandemic? Consider these factors:
The StreetEasy Market Reports are a monthly overview of the Manhattan, Brooklyn, and Queens sales and rental markets. Here are some of the key housing statistics for October 2020. According to their latest report, the NYC housing market is well on its recovery and has reached its pre-pandemic levels. The home-buying activity has risen to levels unseen since the spring of 2019.
A record number of homes went into contract in October in all three boroughs, which shows that many residents are making a long-term investment in the city, according to StreetEasy’s October 2020 Market Report.
Manhattan was a buyer’s market — Sellers accepted offers well below their asking price.
993 homes entered into the contract, the most in any month since May 2019.
Manhattan home prices dropped due to off-market negotiations.
The median sale-to-list price ratio dropped to 88.6% — the lowest on record.
In October, the StreetEasy Manhattan Price Index fell 5.0% compared to last year, the fastest pace since the Great Recession.
The median asking price in Manhattan was $1,385,000.
Pending sales in Brooklyn reached a new record high.
Monthly pending sales reached a new high of 824, a record previously broken in March 2019.
Sales inventory also continued to skyrocket, with an all-time high of 6,515 homes on the market — 9.4% higher than last year.
The StreetEasy Brooklyn Price Index fell 2.4% year over year — half the rate of Manhattan’s price drop.
The median asking price in Brooklyn was $975,000.
Home prices in Queens rose to defy the city-wide trend.
Queens had a near-high 455 contracts signed in October.
The StreetEasy Queens Price Index rose 1.0% year-over-year, the only borough analyzed that saw an increase.
The median asking price in Queens in October was $650,000.
The median sale-to-list price ratio in Queens was 96.1%, meaning that sellers in the borough accepted offers very close to their initial asking price.
As New York continues to fight the pandemic, Governor Cuomo has extended the state’s moratorium on COVID-related residential property evictions until January 1, 2021, through Executive Order. Additionally, previous Executive Orders have prohibited charges or fees for late rent payments, and tenants facing financial hardship can still use their security deposit as payment and repay their security deposit over time.
NYC Real Estate Market Forecast 2021 (Updated)
What are the New York City real estate market predictions for 2021? New York City has a track record of being one of the best long term real estate investments in the U.S. The New York real estate market has been booming year-over-year. NYC home prices nearly doubled in the 2010s. With supply and demand continuing to favor sellers, prices continue to rise year over year.
According to NeighborhoodScout’s data, the cumulative appreciation rate over the ten years has been 47.57%, which ranks in the top 30% nationwide. This equates to an annual average New York house appreciation rate of 3.97%.
During the latest twelve months, New York’s appreciation rate, at 4.68%, has been at or slightly above the national average. In the latest quarter, New York’s appreciation rate has been 0.75%, which annualizes to a rate of 3.02%, which is a positive forecast.
According to Curbed by Miller Samuel/Douglas Elliman, the median home sale price for all of New York City in the first quarter of 2010 was $383,699. Prices started rising in 2013 and by the end of 2018, that number had almost doubled to $658,000.
2018 was the sixth consecutive year of home price gains in New York City. Since last year the NYC home prices have remained flat. The real estate market was already cooling off and the pandemic has further slowed it down after NYC became its epicenter.
Let us look at Zillow’s data. Since 2015, the median home price in NYC has appreciated by roughly 28.24%. At the start of 2020, the typical value of homes in New York City was around $624,000. At present, it is $645,143.
The typical value of homes in New York state is $346,328 and the typical value of homes in New York-Newark-Jersey City Metro is $497,090. These values are seasonally adjusted and only includes the middle price tier of homes.
Here’s Zillow’s housing market forecast for New York, NYC, and New York-Newark-Jersey City Metro. According to their forecast, the supply and demand dynamics will likely push prices north again over the next 12 months. The New York housing market will favors sellers over buyers.
New York City home values have gone up 1.6% over the past year and the latest forecast is that they will rise 6.7% over the next 12 months.
New York (statewide) home values have gone up 5.1% over the past year and the latest forecast is that they will rise 7.6% over the next 12 months.
New York-Newark-Jersey City Metro Metro home values have gone up 4.7% over the past year and the latest forecast is that they will rise 6.3% over the next 12 months.
Please note that this is an overall market forecast and cannot be deemed 100% accurate. The ongoing pandemic has dramatically changed the dynamics of New York’s real estate market and it can vary from neighborhood to neighborhood. Submarket reports from local brokerages like StreetEasy show that prices continue to fall in Manhattan, and have begun falling in Queens.
Brooklyn was showing an increased buyer activity in August, especially at lower price levels and in the Prospect Park submarket but overall there was a price drop of 2.4% in October. The economic impact of pandemic makes everything more uncertain. The market outlook appears fairly bright for Brooklyn, uncertain for Queens, and likely weak for Manhattan, which has record levels of inventory and many potential buyers looking elsewhere. People are moving out and buyer interest in suburban neighborhoods and areas with low population density has spiked.
The chart below, created by Zillow, shows the growth of median home values since 2011 and their forecast until October 2021.
Courtesy of Zillow.com
New York Metro Real Estate Appreciation Trends
Here is another short and crisp NYC housing market forecast for the 3 years ending with the 3rd Quarter of 2021. The accuracy of this forecast for New York City is 77% and it is predicting a positive trend. LittleBigHomes.com estimates that the probability of rising home prices in NYC is 77% during this period. If this price forecast is correct, the New York-White Plains-Wayne, NY-NJ single family
home prices will be higher in the 3rd Quarter of 2021 than they were in the 3rd Quarter of 2018.
Courtesy of LittleBigHomes.com
The change in home prices for New York-Jersey City-White Plains, NY-NJ is shown below for the three-time periods (data up to 3rd Quarter, 2018). The New York Home Price Index has increased for the last 25 consecutive quarters. The all-time high in the New York Home Price Index was 270.5 in the 3rd Quarter, of 2018. The Home Price Index indicates that the New York Market is up 9% over the last 10 years. Over the last thirty years, it is up 145%.
The highest annual change in the value of houses in the New York Real Estate Market was 28% in the twelve months ended with the 1st Quarter of 1987. The worst annual change in home values in the New York Market was -7% in the twelve months ended with the 1st Quarter of 2010. The historical change in home values has been calculated until the 3rd Quarter of 2018. For the upcoming updates, you can visit LittleBigHomes.com.
Time Period
New York MSA Real Estate Appreciation
Last 5 Years
24%
Last 10 Years
9%
Last 20 Years
141%
The question now is what happens moving forward. These numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller? While many have lost jobs, making them ineligible for a home mortgage, some sellers have taken their homes off the market. The increase in the number of new listings in September indicates that sellers are now willing to put their homes on the market.
Across the state, new listings were up + 13.6 percent to 21,062. Pending Sales increased by 49.3 percent (YTY) to 16,813. The YTD pending sales are up by 3% from the previous year. Inventory shrank 21.5 percent to 52,687 units. While buyer activity continues to be robust, seller activity continues to be a bit softer. YTD new listings still lag by – 10.9% as compared to 2019.
Strong buyer activity has continued into the fall, which is normally the start of the seasonal slowing of the housing market. According to NYSAR, with stronger buyer activity in the market, this year and the continued constrained supply of homes for sale, speedy sales, and multiple offers are likely to remain a common occurrence.
The pent up demand will keep the housing market hot for the remainder of this year, which is why the housing forecast for New York is positive for the coming months.
Whether you’re looking to buy or sell, timing your local market is an important part of real estate investment. After the pandemic (hopefully) is over in 2021, the shortage will once again put intense pressure on home prices and apartment rental prices in all four boroughs of New York City. The rent default and eviction trends are negatively affecting the New York rental market. The rent prices are already dropping due to increasing vacancy rates. More information on the latest rental trends is given below.
For sellers in New York, it is a great time to sell. Motivated buyers are looking for houses for sale, and you are not competing with as many property owners. Many sellers have chosen to back out amid this pandemic.
For buyers in New York, the mortgage rates are at their lowest. Sellers are listing more properties. New listings increased by 9.7% y-o-y in October. The rate on a 30-year fixed-rate mortgage has fallen to below 3 percent, according to Freddie Mac. As we write this, it is holding at 2.88%. The 15-year fixed-rate mortgage is 2.36%. This is the lowest monthly average commitment rate on a 30-year fixed-rate mortgage since Freddie Mac began tracking in 1971.
As listings linger on the market for longer, buyers have a special edge in negotiating sales prices. So they should take advantage of scooping up their favorite deals which otherwise are taken away by seasoned investors in the bidding wars.
Any homeowner looking to cash out and sell off their property should do it in the current phase. However, if you looking to buy a home, you should consider a thing called a tipping point. Nationally, the median tipping point is around two years but in New York, it’s 5.8 years.
The higher a home is priced, the longer you’ll need to stay in it to invest pay off relative to renting. It is smarter to buy a property if you plan to be in an area for seven years or longer.
NYC Real Estate Market 2020 Summary: Prices | Sales | Inventory
Here’s a rundown of where the NYC real estate market was before the pandemic and how COVID upended things. We shall now do a quick recap of how the NYC housing market has performed in 2020 so far. We shall mainly discuss median home prices, inventory, economy, growth, and neighborhoods, which will help you understand the way the local real estate market moves in this region.
New York is a fairly walkable city in Queens County with a population of approximately 8,174,290 people. NYC has been one of the hottest real estate markets in the nation for many years. Despite the cooling off, New York City regularly ranks among the most expensive real estate markets in the world. However, that’s due to demand that simply hasn’t let up.
The overall median sales price increased by 5.7 percent to $280,000 for the year 2019. Pending sales increased by 3.0 percent and closed sales were down 1.1 percent to end the year. 2020 began with increased sales activity in the New York housing market, with the year expected to be a strong one for the industry.
The first quarter of 2020 started strong but as we moved into March, the spread and impact of COVID-19 became more apparent. Until mid of March 2020, neither pricing nor transactional real estate in New York saw any major threat emanating from the pandemic.
As we moved further into March, the spread and impact of COVID-19 reflected more in the NYC real estate sales, as it started to diminish. When the pandemic hit New York in mid-March, the real-estate industry was literally not allowed to function. Everything froze. Although some realtors used technology and ingenuity to keep some of their operations going, essentially nothing moved for a period of months.
Many buyers and sellers quarantined, taking themselves out of the market altogether. New homes for sale in New York decreased 9 percent and pending home sales were down 2.9 percent. Inventory levels decreased by 10.4 percent. Months supply of inventory was down 12.1 percent to 5.1 months.
The median and average real estate pricing figures showed an upward trend. The Median sales price increased 6 percent to $291,532. Following the uncertainty and upheaval of March, April was marked by historical lows in sales activity and the strongest pricing trends of the year. As the health crisis stabilizes in the city and surrounding areas start opening up, the industry is watching with hopes of returning activity and buyer interest in the coming months.
Impact of COVID-19 Pandemic On New York City Housing Market
With the housing market all but closed during the spring, the potential home buyers missed out on what is traditionally the busiest buying season of the year. And when the lockdown ended in summer, the market came back with the unleashed pent-up demand. The summer season was full of the usual buyers, plus the people who wanted to buy in the spring but couldn’t. This created a big imbalance in the supply-demand dynamics leading to a record price rise.
According to PropertyShark.com’s analysis of the impact of COVID-19 on the NYC residential market, despite a downward trend in the transactional activity, prices remain unaffected. The pricing trends were firmly positive throughout the crisis and the median sale price in NYC remained steady above the same period last year. The month of March saw a 5% year-over-year gain in the median sales price in the NYC real estate market.
Pricing continued to strengthen in April as well. The month-end posted a year-over-year increase of 5.48% in the median sale price. At $724,900, the first week of April featured the highest median sale price of 2020 by that point, only to be surpassed by the third week of April with its $750,000 median.
Since pricing trends were firmly positive throughout the crisis, May 2020 kept up with that trend. May 2020 ended with a median sale price of $705,000, marking a 4% gain over May 2019. Additionally, this also made May the second-most expensive month in NYC this year, surpassed only by April’s $712,000 median price.
June’s first half however presents a whole new picture with strengthening sales trends and the first significant year-over-year price drop. 813 deals were registered in the first week of June 2019, making it one of the most active weeks in terms of sales activity in the first half of the year.
By comparison, between June 1 and June 7 of the current year, 409 deals were recorded, representing a 50% year-over-year drop, but also a 48% week-over-week upsurge in sales activity. June kicked off with the strongest pricing trends so far this year, posting a median sale price of $743,000, for the highest figure year-to-date.
That represented a 2% gain over year-ago figures. The second week of June 2020, however, posted a median sale price of $679,000, for an 11% year-over-year drop – this was also only the second time that 2020 weekly pricing figures were lower than their year-ago correspondents.
The third week of June closed with a median sale price of $700,000 for a 3% week-over-week gain. However, while it was one of the highest weekly median sale prices in 2020, it still came in 2% below year-ago levels.
However, June 2020’s median sale price of $717,733 also marked the highest median sale price year-to-date, outpacing April and pushing May to the third spot. Additionally, June’s median pushed the median sale price for NYC in H1 up $5,000 – or 1% – in just one month.
All in all, year-to-date NYC saw a total of 14,216 sales, 41% fewer than in the first half of 2019. Pricing trends, however, remained positive, with the year-to-date median sale price across the four boroughs coming in at $690,000, for a 3% gain over H1 2019. Drilling down to the borough level, significant disparities arise when looking at the first half of 2020.
Sales activity continued to strengthen in NYC, with July 2020 up 40% month-over-month, and down by 33% year-over-year. Weekly sales surpassed 500 transactions for the first time in 15 weeks, monthly sales top 2,000 for the first time in four months. Queens’ median sales price marks the first year-over-year decline of 10% in July.
August 2020 was marked by the lowest median sale price of the year at $665,000 and sales dropped 19% below July levels. The prices plunged again, from $680,000 to $665,000, declining 2% as compared to July and 1% as compared to last year. Real estate sales across the four boroughs of NYC were down 45% compared to last year’s August, representing the sharpest year-over-year rate of contraction in three months.
Earlier in June, the median sales price in NYC had hit $718,000 for the highest figure year-to-date. June also marked the first noticeable year-over-year price contraction, coming in 2% below June 2019’s median of $735,000.
With 1,893 deals, NYC sales drop 19% M-o-M and 45% Y-o-Y in August.
The city median drops to $665,000 in August, marking the lowest monthly figure YTD.
Manhattan median misses the million-dollar mark for the third time in six months.
At $553,400, Queens records the lowest median sale price YTD.
Bronx median continues a downward trend since May peak, stabilizing at $453,000.
Brooklyn median drops below $700,000 for the first time this year.
Chart Courtesy: PropertyShark.com
New York Real Estate Market 2020: Statewide Trends (Summary)
Now let’s take a look at the statewide data of the New York real estate market that includes single-family properties, townhomes, and condominiums. Low inventory and increasing buyer activity are keeping the prices stable in the New York housing market. The median sold price remained flat at $270,000 in May as compared to last year.
The month’s supply of inventory dropped by 11.5 percent in May, from 6.1 months to 5.4. On the other hand, sellers in New York are still holding back on listing new properties on the market. New listings are still on the decline as compared to last year. According to NYSAR, as COVID-19 restrictions continue to soften, the New York real estate activity is expected to continue to improve in the coming weeks.
Homes are selling below their asking prices as the median price of homes that have been sold out is $432,800. It shows sellers were willing to negotiate on prices as they were finding it more and more difficult to sell homes at asking prices. While the Empire State continued to re-open in June with “New York Forward,” real estate activity slowly began to strengthen, according to the housing report released by the New York State Association of REALTORS®.
While much of the country was working on a phased reopening of the economy in June, real estate activity continued to strengthen as well. Prices moved higher as the Median Sales Price was up 1.7 percent to $300,000. Days on Market increased 17.9 percent to 79 days. Months Supply of Inventory was down 9.5 percent to 5.7 months.
The month’s supply of homes for sale fell from 6.3 months supply in June to 5.7 months – a dip of 9.5 percent in year-over-year comparisons. The median sales price inched up 1.7 percent this June to $300,000 compared to $295,000 in June 2019. Pending sales are also 25.1 percent lower (year-to-date) as compared to 2019. Closed sales declined 34 percent to 8,107 sales – down from 12,276 units in June 2019.
In July, the healthy buyer demand and constrained supply continued to be the narrative for the New York State housing market. Positive news for home buyers continued to be mortgage rates. The rate on a 30-year fixed-rate mortgage in July fell to 3.03 percent, according to Freddie Mac. This is the lowest monthly average commitment rate on a 30-year fixed-rate mortgage since Freddie Mac began tracking in 1971.
In August, showings and pending sales remained at strong levels while housing inventory remained limited, continuing the competitive bidding market we have seen in recent months. With the stock indexes at or near record highs as mortgage rates remain near record lows, signs point to a busy fall housing market.
In September, new Listings were up 13.6 percent to 21,062. Pending Sales increased 49.3 percent to 16,813. Inventory shrank 21.5 percent to 52,687 units. Prices moved higher as the Median Sales Price was up 17.5 percent to $324,900. Days on Market increased 3.1 percent to 66 days. Months Supply of Inventory was down 22.4 percent to 4.5 months.
Here are the latest housing statistics for October 2020 released by the New York State Association of REALTORS®.
The housing affordability index decreased by – 16.9% to 113 as compared to October of last year when it was 136. An index of 120 means the median household income is 120% of what is necessary to qualify for the median-priced home under prevailing interest rates. A higher number means greater affordability.
New listings increased by 9.7% percent from a year ago.
However, YTD new listings still decreased by 9.0% percent as compared to last year.
Pending sales were up by 38.8% in year-over-year comparisons.
YTD Pending sales were up by 6.0% in year-over-year comparisons.
Closed sales took a jump of 16.6% YTY but still declined by -7.7% if we consider YTD numbers.
Inventory continues to be a large problem as the number of homes for sale dropped by 20.9% as compared to last year.
The month’s supply of homes stands at 4.3 months – a dip of 23.2% in year-over-year comparisons.
The statewide median sales price rose by 24.5% to $340,000 while avg. price jumped by 21.6% to $441,020.
Infographic Credits: New York State Association of REALTORS®
Q3 2020 Report of New York Real Estate Market
Q2 was substantially impacted by COVID-19, which slowed the economy and housing activity along with it for much of the last three months. Recent weeks have seen the economy slowly reopening and buyer activity coming back significantly, with June showing activity as tracked by ShowingTime up substantially from April and May levels and nationally now above June 2019 levels.
New Listings decreased 36.8 percent to 41,762. Pending Sales were down 35.7 percent to 26,597. Inventory levels shrank 19.6 percent to 58,215 units. Prices continued to gain traction. The Median Sales Price decreased by 1.8 percent to $275,000. Days on Market were up 5.4 percent to 78 days. Sellers were encouraged as Months Supply of Inventory was down 9.5 percent to 5.7 months.
According to NYSAR, buyers and sellers came back into the market in Q3 2020, with buyer activity up substantially from a year earlier. While seller activity has improved from last quarter, sellers are not listing enough homes to meet the increased demand seen from buyers. Fast sales, multiple offers, and low inventory are likely to continue into what is normally a slower time of year.
Pending Sales in New York State were up 42.6 percent to 53,262. Closed Sales decreased 8.0 percent to 36,058. Inventory shrunk 21.5 percent to 52,687 units. Prices gazed upward as the Median Sales Price was up 7.9 percent to $307,500. Days on Market increased 12.9 percent to 70 days. Months Supply of Inventory was down 22.4 percent to 4.5 months.
Screenshot Courtesy: Nysar.com
NYC Real Estate Foreclosure Statistics
As per the New York City foreclosure data by Zillow, in New York 0.1 homes are foreclosed (per 10,000). This is lower than the New York-Newark-Jersey City Metro value of 0.9 and also lower than the national value of 1.2. The percent of delinquent mortgages in New York is 1.8%, which is higher than the national value of 1.1%. The percent of New York homeowners underwater on their mortgage is 6.7%, which is lower than New York-Newark-Jersey City Metro at 8.5%.
There are currently 759 properties in New York, NY that are in some stage of foreclosure (default, auction, or bank-owned) while the number of homes listed for sale on RealtyTrac is 3,322. In August, the number of properties that received a foreclosure filing in New York, NY was 100% higher than the previous month and 90% lower than the same time last year.
Potential Foreclosures in New York
759 (RealtyTrac)
Homes for Sale in New York
3322
Recently Sold
3365
Median List Price
$995,000 (2% rise vs July 2019)
2019 NYC Annual Foreclosure Report: By PropertyShark.com
NYC foreclosures dipped 6% year-over-year, while pre-foreclosures slid 7%.
Overall, NYC had a total of 3,056 first-time foreclosure cases in 2019, compared to 2018’s 3,237.
It marked the second consecutive year of decreased foreclosure activity in the city.
Foreclosure activity increased in just one borough, with Manhattan surging 39%.
The Bronx undergoes the steepest drop in first-time foreclosures – down 21% year-over-year.
Queens logs most foreclosures with 1,164 unique cases.
Staten Island foreclosures remain relatively flat, yet still 313% above 2014 levels.
Brooklyn’s 11236 zip code was 2019’s foreclosure hotspot with 4% of all city-wide cases.
Similar to the trend of foreclosures, pre-foreclosures in NYC also trended downward in 2019.
7% fewer residential lis pendens were filed last year than the year before.
In particular, Queens recorded the largest year-over-year drop, with 20% fewer pre-foreclosure cases than in 2018.
Conversely, Staten Island had 4% more lis pendens in 2019 than it did in 2018.
NYC Real Estate Market: Is It A Good Place For Investment?
Is NYC a Good Place For Real Estate Investment? Many real estate investors have asked themselves if buying a property in NYC is a good investment? The fact is that New York house prices are not only among the most expensive in New York, but New York real estate also is some of the most expensive in all of the U.S. Since NYC real estate is very expensive for many investors, there are several other areas where you can invest in real estate and we shall be discussing some of them here.
It’s a relatively good time to buy a property in New York as housing inventory is on the rise and competition is less. Currently, the NYC housing market is relatively more friendly to buyers than sellers. With the phased opening of the economy, buyers have been quicker to return to the housing market. It seems they want to cash in on the opportunity to purchase their favorite properties amid historically low-interest rates on a 30-year fixed-rate mortgage.
Keeping aside the short-term impact of the ongoing pandemic, let’s take a look at the number of positive things going on in the NYC real estate market which can help investors who are keen to buy an investment property in this city.
The Impact of International Buyers in New York
Despite all the talk about the one percenter dominating this and that, the truth is that the international elite is bolstering the price of luxury real estate in New York City. They see NYC real estate investment as part of a multi-pronged approach. The property is almost certain to appreciate, so it is an investment. Owning a piece of the NYC housing market gives them a place to stay if they have to flee their home country. The money invested in the NYC housing market is typically not reported to their government, and it is almost guaranteed not to lose value. Ironically, foreign owners like these are much more willing to take a modest loss when they sell when they are no longer interested in the property.
New York City’s Expanding Luxury Development
New York’s rent control laws don’t apply to luxury units, and developers have chosen to build these instead of the affordable housing the city needs. However, this development isn’t limited to the densest parts of New York City. For example, Staten Island’s North Shore is seeing new luxury condo construction. Interest in the area is driven by both the improved transit via the new ferry service and luxury buyers seeking relative bargains. This is aside from the oversupply of luxury penthouse units in the NYC housing market.
NYC Rental Market is Strong
The factors that led to the incredibly high rental rates in the NYC real estate market haven’t changed. One is the sheer number of people crammed into such a small space. Another matter to consider is all the zoning regulations that limit housing supply, though New York City has had the sense to give tax breaks for those who turn warehouses and commercial properties into rental units.
This means that non-residential properties can be a viable NYC real estate investment, assuming you can get permission to turn it into lofts, condos, or apartments. Strict eviction laws that make it difficult to remove tenants who are a nuisance, time-consuming to remove if late on rent, and nearly impossible to get rid of it in a rent-controlled unit all force property owners to charge much higher rent in the NYC housing market. It is the classic case of cost-shifting causing others to pay a fortune.
The median rent in New York City now exceeds three thousand dollars a month. One-bedroom apartments and studios rent for roughly three thousand dollars a month, while two-bedroom apartments rented for about 3,800 dollars a month. This is why the NYC real estate market is one of the most expensive in the world.
Rental Trends Due to Economic Affects of the Pandemic:
According to Steeteasy.com, as of July, rents in Manhattan have declined by 3.1%, marking the largest year-over-year drop since the Great Recession, when rents in Manhattan fell nearly 10% over the course of a year. New York City’s unemployment rate reached 20.4% in June 2020, already twice as high as the Great Recession’s peak unemployment rate of 10.4% in December 2009.
High unemployment leads to higher vacancy rates, as the New Yorkers who can no longer afford to live in the city. It also means lower demand for the rental inventory piling onto the market as leases expire throughout the summer. As demand continues to decrease, rent prices are likely to fall more than they did during the Great Recession.
As of October 2020, the average rent for an apartment in New York, NY is $3074 which is a 14.48% decrease from last year when the average rent was $3519, and a 5.01% decrease from last month when the average rent was $3228.
One-bedroom apartments in New York rent for $2683 a month on average (a 9.77% decrease from last year).
Two-bedroom apartment rents average $3407 (a 10.86% decrease from last year).
The average apartment rent over the prior 6 months in New York has decreased by $362 (-10.5%).
One-bedroom units have decreased by $226 (-7.8%).
Two-bedroom apartments have decreased by $255 (-7%).
The cheapest neighborhoods where rent prices are less than New York’s average:
East Brooklyn, where the average rent goes for $1,252/month.
High Bridge, where the average rent goes for $1,510/month.
Parkchester, where renters pay $1,641/mo on average.
Saint Albans, where renters pay $1,687/mo on average.
Bedford Park, where the average rent goes for $1,756/month.
The Rockaways, where the average rent goes for $1,757/month.
Bensonhurst, where renters pay $1,794/mo on average.
Tremont, where the average rent goes for $1,800/month.
University Heights, where renters pay $1,803/mo on average.
South Bronx, where the average rent goes for $1,845/month.
Queensboro Hill, where renters pay $1,868/mo on average.
The Known Opportunities for Bargain Hunters
The NYC real estate market may seem dominated by five and ten thousand dollars a month apartments in Tribeca, but there are much cheaper neighborhoods. If you’re considering buying NYC real estate investment properties, start looking in neighborhoods like East Brooklyn, High Bridge, and Saint Albans. The average rent for apartments in Saintalbans is roughly 1200 dollars a month, while rents are less than 1500 a month in High Bridge. Since property values are based on multiples of the rental income, this means that you can snap up a small apartment building in the cheapest NYC real estate market for the cost of one luxury condo.
The Overall Cooling of the NYC Housing Market
The NYC housing market can be described as cool, though some will call it a buyer’s market. Things slowed down significantly in 2016 and 2018 as several groups of international buyers found it harder to buy properties or had less need to do so. On top of this is the trend of properties selling below their asking price unless they’re the cheapest unit in the neighborhood. Sales volume has increased somewhat, but there is a wider selection now than several years ago. More importantly, prices are a tenth to a quarter below their 2015 highs.
This is a good time to buy an NYC real estate investment property because the market will continue to warm up as long as the economy remains stable. NeighborhoodScout’s data show that during the latest twelve months, New York’s appreciation rate, at 5.25%, has been at or slightly above the national average. In the latest quarter, New York’s real estate appreciation rate has been 1.04%, which annualizes to a rate of 4.22%.
The Softening New York Luxury Market
The increasing supply of luxury real estate relative to demand is leading to more being done to sell units at their list price. For example, luxury apartment buildings are offering more and more amenities to justify their high monthly rents. Another sign that the market is softening is the growing time on the market for such properties. A few notable properties have sold only after being subdivided into more “affordable” luxury units.
This means that investors with the money could buy a larger unit as a form of NYC real estate investment, subdivide it, and then sell it for a profit. If you have the cash and can close on the property, you could buy these premium properties for up to half of the listing price, too. The alternative is buying slow-moving one and two-bedroom apartments knowing they’ll eventually be worth more.
We mentioned the softening of the NYC housing market already, especially at the higher end. We brought up the increased amenities being used to fill luxury properties that aren’t being held as an NYC real estate investment. However, many properties may sit on the market for years. This is enabled by a large number of properties not lived in year-round and those who simply don’t want to reduce the price tag of their property to a point lower than what they paid for it. As listings pile up and the ongoing carrying costs like high property taxes rack up, expect to see a wave of sellers who will mark down their New York City real estate to move it because they can’t afford to wait to sell it.
The Legislation on the Table Will Increase NYC Rental Rates
There are around a million rent-stabilized apartments in New York City. There are several bills in the Democrat-controlled state senate and a massive tenant’s rights push that will likely lead to tighter restrictions on landlords. For example, it would be harder to get apartments removed from the rent-stabilization policy and limit the ability of landlords to raise rents after existing tenants move out.
While this hurts landlords who own rent-controlled properties, stricter rent control rules result in a reduction in housing supply and rents going up five percent more than they would have otherwise. Conversely, landlords who don’t want to deal with the hassle anymore may be willing to sell properties at a discount simply to get out from under the oppressive regulations.
New York Real Estate Investment: Where to Invest?
New York is dominated by renter-occupied one or two-bedroom apartments. 76.75% of New York’s dwellings are rentals. As per Neigborhoodscout.com, a real estate data provider, one and two-bedroom large apartment complexes are the most common housing units in NYC.
Other types of housing that are prevalent in NYC include single-family detached homes, duplexes, rowhouses, and homes converted to apartments. The New York housing market has affordable townhomes. New York’s single-family homes account for just 1.15% of the city’s housing units.
During the latest twelve months, the New York real estate did cool off. However, the cumulative appreciation rate over the ten years has been 38.81%, which ranks in the top 30% nationwide. Evaluate the specifics of the NYC housing market at the time you intend to purchase. Hiring a local property management company can help in finding tenants for your investment property in NYC.
There are 188 neighborhoods in New York (as per Realtor.com). Tribeca has a median listing price of $3.7M, making it the most expensive neighborhood. Riverdale is the most affordable neighborhood, with a median listing price of $375K. Graniteville is another popular neighborhood for homebuyers who can afford to buy a home in the median price range of $427K.
Some of the other popular neighborhoods in NYC are Floral Park, Jamaica, Woodside, Queens Village, Brooklyn, Staten Island, Astoria, Teaneck, Riverdale, Rosedale, Flushing, Bayside, Kew Gardens, Queens, and Maplewood.
There are some buyer-friendly neighborhoods in New York City where buyers have a bit more negotiating power in neighborhoods as compared to sellers. Jackson Heights is one of New York City’s most buyer-friendly neighborhoods at the moment with home prices under $700,000.
Other buyer-friendly markets with a median sales price below $700,000 include Rego Park, where the median sales price in 2019 was $429,999 and the sale-to-list price ratio was 95 percent; Sheepshead Bay ($699,000, 93 percent), East Flatbush ($649,000, 97 percent); and Brighton Beach ($619,500, 94 percent).
Buyers have a bit more negotiating power in neighborhoods where the median home price falls between $700,000 and $1 million. In areas like Midtown East, where the median sales price in 2019 was $899,000, listings typically sold at a 6 percent (or $54,000) discount.
The other neighborhoods best for buyers looking to spend between $700,000 and $1 million are Bayside, where the median sales price in 2019 was $717,000 and the sale-to-list price ratio was 93 percent; Gravesend ($799,000, 93 percent); Flushing ($786,668, 93 percent); and Bay Ridge ($739,000, 94 percent).
As we write this, 7282 single-family homes are currently for sale on Realtor.com within New York residential boundaries, including open house listings. The most expensive single-family homes can be found in the Central Brooklyn neighborhood in the city of Brooklyn, NY where the median price is in the range of $773K. Currently, it is a buyer’s market.
The median list price of homes in Central Brooklyn was $772.5K in October 2020, trending down -3.3% year-over-year. Homes in Central Brooklyn sold for 2.12% below the asking price on average in October 2020. They remain on the market for 137 days on average. The median listing price per square foot was $618. The median sale price was $760K.
Another expensive neighborhood is Midtown Manhattan where the median sales price in 2019 was $1.85 million with a sale-to-list ratio of 90 percent. All of this could vary from time to time and can be checked on Realtor.com. Check out some of the best neighborhoods for investing in New York for the long term→ These neighborhoods have been selected from all the five boroughs.
If you think of investing in NYC, you have decided on a long-term investment property. Here are the ten neighborhoods in NYC having the highest real estate appreciation rates since 2000—List by Neigborhoodscout.com.
Broadway / W 225th St
W 58th St / Ave Of The Americas
W 116th St / Amsterdam Ave
East Rd / West Rd
W 57th St / 5th Ave
Amsterdam Ave / W 166th St
Broadway / Grand St
Madison Ave / E 60th St
Metropolitan College of New York / W Broadway
Touro College / Broadway
Other Markets For Investing In New York Real Estate
Apart from NYC, you can also invest in Buffalo, NY. Ignore the Big Apple and look to the west if you want to buy rental real estate in New York. The Buffalo real estate investment offers a surprisingly good deal with low prices and relatively high rental rates. The Buffalo real estate market is dominated by older homes. A majority of homes in the Buffalo housing market were built before World War 2.
Interestingly, this also means that there are many small apartment buildings designed to serve a population that rented small units close to their jobs. For example, roughly a third of homes are single-family detached homes, while almost half take the form of small apartment buildings. This creates an excellent opportunity for those in the market for Buffalo rental properties. You could buy a small apartment building with multiple tenants for the cost of a single rental property in a more expensive New York real estate market.
Another real estate market in the state of New York is in Syracuse. Syracuse’s real estate market offers cheaper property with a higher return on investment and a less hostile legal climate. It is one of the better choices if you want to invest in New York state. Another issue that factors into the equation is the job market. Lots of cities have a great quality of life but almost no one can afford to live there.
The Syracuse housing market ranked 6.3 out of 10 for its job market. That’s better than rural and much of upstate New York. And it is why there is a slow trickle of people moving in to replace those who leave. That’s why the Syracuse real estate market has a net migration of 5 or a stable population. This is in sharp contrast to the depopulation seen in most Rust Belt cities. It also means Syracuse’s real estate investment properties will hold their value for the foreseeable future if they don’t appreciate it.
Albany is another real estate market which is good for investment. Albany is a steadily appreciating real estate market. While it isn’t as famous or hot as NYC, it offers an affordable entry point and a massive pool of perpetual renters. Though it may not be somewhere you want to live, many locals are choosing to stay and make their homes here. And that will continue to drive demand for Albany real estate investment properties as long as they are priced right.
You can also consider Rochester. The Rochester real estate market is stable, offering slow appreciation, affordable properties to outsiders, and good returns. It has strong, long-term potential that is only buoyed if NYC collapses. And this is one of the reasons why being everything the Big Apple isn’t is in your favor.
The Rochester real estate market enjoys a healthy population profile. Roughly a quarter of the population consists of children, and many are likely to remain due to the healthy job market. It also means that the Rochester housing market won’t crater if the job market weakens the way San Francisco collapses whenever the tech bubble bursts. Others choose to remain here because of the low cost of living.
Let us know which real estate markets in the United States you consider best for real estate investing!
Please do not make any real estate or financial decisions based solely on the information found within this article. Some of the information contained in this article was pulled from third party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, the Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US. This article aimed to educate investors who are keen to invest in New York real estate. Purchasing an investment property requires a lot of studies, planning, and budgeting. Not all deals are solid investments. We always recommend doing your research and take the help of a real estate investment counselor.
References:
Market Data, Reports & Forecasts
https://www.redfin.com/blog/data-center
https://www.zillow.com/new-york-ny/home-values
https://www.realtor.com/realestateandhomes-search/New-York_NY/overview
https://www.propertyshark.com/Real-Estate-Reports/nyc-real-estate-covid19/
October 2020 Market Reports: NYC Home Sales Reach Pre-Pandemic Levels
https://www.redfin.com/city/30749/NY/New-York/housing-market
Foreclosures
https://www.realtytrac.com/statsandtrends/ny/new-york-county/new-york
https://www.propertyshark.com/Real-Estate-Reports/NYC-Foreclosure-Report
International buyers
https://ny.curbed.com/2019/2/18/18229286/luxury-nyc-condos-real-estate-report
Why American buyers are replacing foreigners in the luxury market
Softening luxury market
https://www.businessinsider.com/new-york-city-luxury-real-estate-not-selling-penthouse-gimmicks-2019-2
Legislation
https://www.brickunderground.com/blog/2015/01/rent_stabilization_misconceptions
https://www.gsb.stanford.edu/faculty-research/working-papers/effects-rent-control-expansion-tenants-landlords-inequality-evidence
https://www.politico.com/states/new-york/newsletters/politico-new-york-real-estate/2019/04/09/mci-loophole-in-rent-regs-212895
Rules for high rents
https://ny.curbed.com/2019/5/14/18617990/new-york-rent-control-tenants-rights-landlords
https://www.forbes.com/sites/jeffreydorfman/2016/06/16/rent-control-treats-the-symptom-not-the-cause-of-rising-housing-costs
https://www.forbes.com/sites/scott-beyer/2015/04/24/how-ironic-americas-rent-controlled-cities-are-its-least-affordable/#7b7e3e048c62
High rental rates
https://www.trulia.com/research/rent-control-sf-nyc
https://www.rentjungle.com/average-rent-in-new-york-rent-trends
Potential for bargains
https://www.rentjungle.com/average-rent-in-new-york-rent-trends
The Overall Cooling of the Housing Market
https://www.forbes.com/sites/fredpeters/2019/03/12/the-real-estate-market-recovery-and-retreat-in-new-york-city/#3ee366d3100f
Tax law
https://www.cnbc.com/2019/04/01/manhattan-real-estate-sales-fall-for-sixth-straight-quarter.html
Expanding luxury development
https://www.businessinsider.com/nyc-penthouse-expensive-surplus- divided-up-smaller-units-sales 2019-1
https://object.cato.org/sites/cato.org/files/serials/files/regulation/2018/12/regulation-v41n4-2.pdf
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