Is the New York Housing Market Facing a Downturn?
Historically speaking, New York has some of the highest real estate prices in the world, and with property values rising everywhere, those prices have gone even higher. But things may be about to change. With inflation increasing and the Federal Reserve raising interest rates seven times in 2022, the housing market in New York has started to cool off. If the economy takes a downturn — which some are saying is likely or inevitable — then prices in New York and Chicago are quite likely to decline. So what’s the outlook for real estate in New York in 2023, and what does it mean for buyers?
Property Prices in New York in 2022
According to data from PropertyShark, real estate values in the Upper West Side of NYC have risen by 15% since last year. However, the number of real estate transactions has dropped by 38% since the previous year, and the median sale price of property in Manhattan has dropped by 8%. Contract sales in Manhattan have dropped by 20 to 30 percent across different property types — condos, co-ops, single family homes, and more. Overall, Manhattan has seen fewer signed contracts, fewer bidding wars, and more frequent reductions in price.
The drop in new contract signings isn’t isolated to just Manhattan, either — signings are down nearly everywhere in New York City and surrounding environs. New contracts in Brooklyn fell by 24% for co-ops, mostly in properties below $500,000. Brooklyn condo signings fell by 32%, and new listings for condos in Brooklyn fell by over 25%. The same is true for Long Island, where contract signings for single-family homes dropped by 21%, and closings on homes under $400,000 fell by a whopping 40% — mostly due to rising mortgage rates, appreciation in prices, and a lack of inventory.
Another reason for the anemic state of the market in New York? Property taxes. New York’s state law heavily favors single-family homeowners over owners of other properties. such as commercial buildings or rental properties. Owners of condos and co-ops also pay higher property taxes. The tax situation has gotten bad enough that residents are going into debt or even considering leaving the state because it’s too difficult to make ends meet. Some residents have seen their property taxes double or triple as their older houses are surrounded by large-scale buildings and “McMansions.”
In short, the numbers don’t lie — the housing market in New York is definitely cooling off.
Which Suburbs are Most at Risk
A decline in buyers isn’t great news for homeowners. Higher interest rates and inflation mans a greater financial burden on homeowners, and things could get even worse if there’s an economic downturn. According to the real estate analytics form Attom, there are 50 counties most at risk for significant price declines in the US. Of those, nine are in and around New York City. These counties are most at risk because they tend to have higher unemployment, more foreclosures, underwater mortgages, and too much housing that’s unaffordable for average buyers. Further, rising mortgage rates have put a damper on sales, and some homeowners have had to find more income or additional jobs just to cover their home payments.
The areas most at risk in and around New York include Brooklyn, Staten Island, Bergen, Essex, Ocean, Passaic, Sussex, Union, and Rockland.
How This Might Benefit Buyers
While the overall outlook for many New York City homeowners may not be rosy, there are some ways potential homebuyers could benefit this situation. A drop in signed contracts and price reductions means some relatively affluent New York properties might now be within reach of homebuyers. While the prospect of getting a nice New York home for lower-than-usual New York prices may be sorely tempting, there are a few things to be cautious about.
First of all, those aforementioned property taxes are something homebuyers should definitely take into account. The same goes for mortgage rates and NY home insurance rates — per numbers from Ross Martin at The Zebra, New York does have some prohibitively high premiums, especially in Manhattan — so it pays to shop around and try to find relatively cheap New York homeowners insurance if you can. After all, having a dream home in New York isn’t going to be much good if you end up in debt or unable to pay for insurance and upkeep.
There are already tales of unfortunate families settling in their new homes only to be blindsided by a tax bill they weren’t prepared for. It always pays to do some homework and solid research on what it might cost to buy a NYC home amidst this decline in prices, and your best bet may be to find a good realtor in New York who can help you navigate these complicated waters.