Yesterday the Fed raised the interest rate a quarter of a point and national home sales decreased for the seventh straight month. No one would blame you for assuming that New York City home prices will be falling soon but buyer demand remains strong. There are two factors pushing buyers into the market. The first is soaring rental prices and the second is the huge allure of New York City right now.
The Corcoran August 2022 Manhattan and Brooklyn Rental Reports were recently published. For months rental prices have been increasing dramatically with the average rent in New York City surpassing $5,000/month for the first time in July 2022. August is typically the busiest month in the rental market and this year was no exception. In Manhattan, the median rental price increased 3% from the month before hitting $4,360. While a 3% increase isn’t substantial from one month to the next, rental prices increased 38% year over year. That was enough of an increase to force many people to move out of their rental simply due to economic necessity. Brooklyn was only slightly less expensive with a median price of $3,700 and a 37% increase from last August. Vacancy rates are starting to tick up ever so slightly indicating we may have hit the peak of the rental pricing.
At the Boland Team, we have helped a large number of would-be buyers become owners in the past few months. When faced with the prospect of paying out well over $50,000 a year for a rental, people are starting to question if that makes good financial sense. Instead, many are choosing to purchase a property to stabilize their housing costs and build long term wealth. The arc of a real estate graph is never as sexy as a stock market graph but slow and steady can win the race.
Now let’s look at the really fun factor which is driving demand in the New York City rental market. More people want to live in New York and are moving even when it isn’t for a job. The city is vibrant and exciting again. I recently spoke with someone from San Francisco who told me he suddenly noticed all his friends were moving to NYC. His company has an office in the city and didn’t care where he worked. Now he and his adorable pug are searching out neighborhoods in Brooklyn and lower Manhattan to find their home. Not all transplants will have the money for a down payment to purchase a home or have relatives who can step in to fill the gap. As a result, the rental market and sale prices will not experience the dramatic shifts you may see in the rest of the country over the next few months.