There has been so much buzz recently about renting vs. buying an apartment as the economics of renting outweigh being an owner. People want to know if now is a good time to buy a home. We all love a definitive answer, but the real answer is that it depends on your financial situation and how you are going to be using the property.
Today the market is best suited for a long-term buyer — long term considered to be five to seven years in our fast-paced city. It is not a time to fix and flip but if you are looking to lock in stable housing costs to avoid an uncertain rental market then this is the time to buy.
Here are some important considerations as you approach the Manhattan market:
Is buying a home a good investment? It’s a common question. There are plenty of buyers who determine they are better off renting — but are they? If you crunch the numbers, housing will never stack up well against other financial investments.
The fear of missing better returns keeps many would-be buyers in rental apartments only to regret it later. Rentals are frequently built smaller and with less expensive finishes than an apartment for sale, so if the quality of your home matters to you, renting might not be the best option.
Landlords with an entire building of apartments to rent will focus on wowing you with gyms, pools, rooftop terraces, doggy spas and more while the apartments themselves are a bit smaller than a typical Manhattan condo for sale. Landlords know they will not be rewarded for renting out rooms that are too large. There is a limit to what you can charge a month for a two-bedroom rental.
Yet if you are buying a condo in NYC there is room for higher end finishes to bring in a higher price, especially for larger rooms and soaring ceilings. How else can the enduring popularity and resale value of a Robert A.M. Stern designed building be explained apart from the scale of the rooms, stunning architecture, and superior finishes?
There are also emotional benefits the stability of ownership confers. For many, simply having a sense of permanency and control over their housing costs lets them sleep better at night. Manhattan is an expensive real estate market and the best real estate agents in NYC will tell you that over time apartments hold their value while the finest homes are rarely on the market for rent.
The Corcoran Report says…
Looking into the Q4 2023 report published by The Corcoran Group, it certainly seems like now is the time to buy. According to the research, prices are at an eight year low with the median price dropping 9% to $1,305 per square foot. Both the median and average sales prices were technically higher because of the increased percentage of sales in the luxury market giving the price per square foot analysis more relevance.
High mortgage rates throughout last year dampened demand with transaction volume down by 13% year over year, particularly impacting the sub $3 million market. With the news that inflation had come down and the Fed expected to reduce rates in 2024, mortgage rates came down well over a percentage point. That welcome news was enough to unleash pent up demand in the final weeks of 2023.
Transaction volume has been down for five consecutive quarters, demonstrating that many buyers were waiting for the right time to get back in the market. Meanwhile, listing inventory fell but not to the same levels seen in the rest of the country. Manhattan inventory is only down 2% year over year. This has done little to create a sense of urgency for buyers and as a result, the days on the market average is up 6% annually. Yet there are at least 5 reasons to sell your home now so keep reading.
Good news about rates
Now more than ever, buyers should begin their search by reaching out to their mortgage professional to find out what rates are available to them. Rates are dependent not only on the financial markets but also the borrower’s credit score and relationship with the financial institution.
Individual rates can be far better than what is reported. There are even opportunities for perks such as cash toward closing in certain areas of Manhattan. The best time of year to buy a home is coming up as the Spring market begins. This increased demand typically hits NYC in February so do not delay.
If you are looking for a deal, determine your priorities. You might be wowed by 100,000 square feet of amenities space but will you use it? If you will then proceed because there are a number of new Upper West side condos for sale which offer it all from a basketball court to a room for arts and crafts.
Buildings with amenities that are not of interest to you will drive up your monthly payment unnecessarily so choose wisely. What about renovations? Might you take on some renovations to reduce the purchase price of the home? Just be aware that most condos for sale in Harlem have been built in the past ten years so it could be hard to find a fixer-upper there.
Instead, consider expanding your search to other neighborhoods. Also be careful about assuming every property that has been on the market for over 90 days must have a desperate seller. There are plenty of deep pocketed owners in Manhattan.
If you are considering selling, certainly the evidence of increased demand and lower mortgage rates should be heartening. Here are five reasons you should consider selling your home if you are ready.
- NYC continues to be vibrant and attracts newcomers to the city.
- New developments have sold well over the past few years, yet the new offering pipeline is historically low giving resales a better chance this year.
- While rental price increases have moderated, they remain high and could increase again in the Springtime.
- Are you tired of being a landlord? If you are an absentee owner who has rented out your place over the past few years, you could be holding onto a declining asset as appliances age and renovations will be necessary in the future.
- Still not sure which of any to proceed. Do not dither and miss the Spring market. You can list your place for sale and for rent at the same time to see what the market gives you.
2024 is not expected to provide the same sizzle and excitement we saw in the 2021 and 2022 market. However, it is likely to be a good market.
Real estate is a slow-moving market, and you will not score instant gains like you might trading a hot stock. If you are buying a home now stay focused on what you cannot change such as the location, purchase price and monthly charges. You can always renovate and refinance, but your purchase price is locked in. You make money when you buy wisely, and you collect it when you sell.