Elegran Market Update: January 2020
Recent trends in Manhattan’s real estate market are indicating that the market is strengthening once again. Demand is increasing at a faster pace than supply, with an 11 percent year-over-year uptick of signed contracts in January. As contract activity is picking up a few months earlier than expected in NYC’s residential market, prices will likely start to appreciate in the coming months. And with a consistently rising market pulse, the state of the market will only continue to get stronger. Here are some insights into what these trends mean for buyers, sellers, renters, and investors in NYC.
The U.S. economy is in a fundamentally sturdy place, with low employment and a strong stock market. Meanwhile, NYC’s market has been affected by legislative and tax reform, and the foundations of the market as a long-term investment remain intact.
The recent increase in demand for homes in NYC indicates that the market is beginning to shift from a buyer’s market towards a more balanced market. The price spread between buyers and sellers is decreasing, which indicates a shift toward price appreciation on homes throughout the city.
We predict that there is a 6-month window of opportunity to buy a home in NYC before the market becomes increasingly competitive. Homebuyers should aim to move sooner rather than later, as demand and prices may continue to move upwards.
As rents were flat and the sales market was declining during the month of January, many New Yorkers preferred to be liquid and rent for longer. As average rents are steadily increasing with a 6 percent growth and the stock market is at an all-time high, now may be the time for prospective buyers to rebalance their portfolio and purchase real estate.
First-time homebuyers should take advantage of this rare opportunity to purchase in a less competitive market. Currently, the $600K - $1 million price point is the most active in NYC. During a time without all-cash investors clamoring for apartments, buyers have more options and a better market environment to purchase a home.
As demand continues to pick up and inventory starts to lag, the market will start to shift in favor of sellers. In the current state of the market, sellers can increase their power by pricing below market rate to further increase demand for their home. Sellers can be positioned for a quick sale if they price realistically and thoroughly prepare their home for showings. Homes that have been staged, decluttered, and renovated show well and will sell more quickly.
After several years of new rental buildings entering the market, rising concessions and stagnating rents, these trends are reversing. Inventory is getting absorbed as renters snatch up homes on the market, and the city is seeing few new development projects. The median rental price increased 6 percent year-over-year in Manhattan, and 9 percent in Brooklyn. Concessions are dissipating, with a 3 and 13 percent decrease in Manhattan and Brooklyn, respectively. And with rental prices on the rise, the market is posing more challenges for renters to find good deals in NYC. Those looking to rent are currently facing high competition and fewer options in NYC due to high demand and low levels of inventory.
As increasing legislative reform has made it more difficult and expensive to be a landlord in NYC, investors have been largely absent from NYC’s residential market. Throughout the last 5 years, the yield on Manhattan’s residential real estate has declined as rents stayed flat and prices continued to increase. Many investors decided to go down other investment avenues, such as the stock market, as these provided a more favorable return for commensurate risk.
As rent continues on an incline and if prices start to move, this will enhance the returns an investor can expect on properties in NYC. This, combined with low competition from other investors in the market, makes now a good time to invest in NYC residential real estate.
Are you looking to buy in NYC, or interested in gaining more insight into the market? Contact us today for more information.