The real estate markеt in and around New York has been especially turbulent during the pandemic, and while it has recently started to normalize, what should we expect 2022 to be like for the New York housing market?
According to data gathered by Miller Samuel Inc. and Douglas Elliman Real Estate, sales around metropolitan New York are falling. This shortage of housing listings is deterring property buyers in New York’s suburbs, sales have fallen sharply in the last quarter of 2021. In large part, due to the fact that the demand is drastically outweighing the supply.
The supply problem is made worse by the ever increasing property prices in the region. Industry experts note that many of the highest priced apartments on the market are incredibly overpriced relative to comparable sales, however, this has not deterred people from purchasing such properties.
Buyers are acquiring properties faster than sellers are listing them. According to the report, 1,950 contracts were signed during the month of November of 2021 in Long Island excluding the Hamptons, which is 13 percent fewer than a year earlier. At the same time, new listings have fallen 26 percent to 1,751.
The mismatch between supply and demand is leading to stagnation that could last until the end of this year. That, in turn, will hurt sales and the New York economy as a whole, experts warn.
The Mass Exodus From New York
To better understand the current situation of the housing market in NY, we need to take a look back at its state before the pandemic. In 2018, properties in New York were the most expensive in the USA. The average price of housing in Manhattan had reached around $1908.40 per sq ft.
However, In 2020, due to the trauma and stress caused by the pandemic persuaded many New Yorkers to permanently leave the city in the quickest way, leaving many empty apartments and causing property prices in the city to crash.
Real estate sales in New York City plunged 25% in the first half of 2020 compared to the same period in 2019, according to data from Property Shark.
The situation is not particularly helped by the fact that in June of 2019, after the thawing of the economy began, housing prices increased and the median price reached its highest value in the city since the beginning of that year, amounting to $717.7 thousand per dwelling, which was also a contributing factor to the mass exodus of 2020.
According to an analysis of telecommunications, 420,000 people left New York between March and May of 2020. In southern Manhattan, 5% of the apartments were empty, and in the wealthier boroughs, nearly half the apartments were vacant. It’s not just the rich who are leaving the city – many students, artists or many in the restaurant industry can no longer make a living in New York, due to the chaos caused by the virus.
The Future of the New York Housing Market
Rent Will Go Up, But Not As Fast As Real Estate Prices
New York is famous for its high standard of living as well as rent prices that are far above the average in the US. While the pandemic has somewhat helped lower the price of rent in the city, rents will inevitably rise back up to their standard levels and even surpass them due to a combination of factors like the increasing demand but also due to inflation.
We can clearly see that in the places where demand has normalized to pre COVID levels, rent has been getting higher and higher.
According to Bloomberg, Manhattan landlords have been raising rents, often by 50%, 60%, 70%, for tenants who signed deals last year when prices were in a free fall, and due to this some tenants are being forced to move out due to them not wanting to sign new lease agreements.
Real Estate In The City Will Remain Popular
Since the end of 2021 year, demand has seen significant growth as companies actively seek new space amid increasing supply constraints, however, analysts predict that the demand for real estate in New York won’t be back to its normal levels at least until the end of the pandemic.
In the short to medium term, housing affordability will slowly deteriorate as, although in moderate proportions, house price growth rates are likely to outpace income growth rates. The market is going up and experts note that the current up cycle in property is shaping up to be the longest lasting in the last thirty years.
However, every beginning has an end. In the second half of 2021 fears grew that housing was overpriced, that the market was breaking away from its fundamentals and starting to overheat. In short, the bubble is inflating again.
The trend of worsening housing affordability could be slowed or even reversed if economic policies are changed (as has been hinted many times). For example, reform of the rental market could be undertaken to create a more balanced tenure structure. This would lead to more households choosing to rent, which would reduce demand, and so lead to fewer house price increases.