For my yearly real estate predictions, it is usually safe to assume that the current trends will continue but with so much flux in our financial markets it isn’t easy to say what will happen and even top experts disagree.
While much has been written about increased mortgage rates and a slowdown in sales, it is important to remember that Manhattan is quite literally an island and is frequently insulated from what is happening in the rest of the country. So, what will happen to the NYC real estate market in 2023?
Here are my predictions.
- Inflation will come down but most experts predict it is unlikely we will see inflation rates of 2% anytime soon. 3-4% is a more likely range according to top economists. We can all agree that no one likes inflation but it is good for property value. Inflation also impacts rental prices. As of November, the median rent in New York City was $4,200/month. While that number is down from last summer it is still 24% higher than last year. Buy now to protect yourself against further rent escalations and let inflation increase your equity over time.
- Mortgage rates have come down over the past few weeks but still remain more than double what they were a year ago. Widely circulated reports of rates as high as 7% are common. Real estate buyers have been spoiled by five years of low-rate shopping. It almost didn’t matter where you got your mortgage, buyers simply shopped for the lowest rate. Now we are in an environment where you must have a relationship with a bank to get a good rate. If you are with the right bank you could get up to 2% off the prevailing rate. This shift to relationship banking is a trend I see continuing in 2023.
- Prices will either moderate or come down. It is difficult to predict with both supply and demand remaining uncertain. It is important to remember New York City did not see the historic price appreciation the rest of the country experienced over the past few years, nor are we likely to see the same drops many urban housing markets will face. NYC demand is being fueled by renters with sticker shock, people relocating for jobs and those looking for a place in the city, either to shorten their work commute or to come enjoy all the city has to offer, now that it is fully opened and vibrant. Real estate in the city has always been a safe haven for investors and while the returns cannot match the dizzying highs of the stock market and crypto currency, it also doesn’t experience the same lows.
- Sellers will have to be realistic during this time. You must price slightly below your competition and make certain your place shines online. Over the course of the year, if sellers hold off because they understand they cannot push their price, we could see a slight inventory shortage which will moderate any price depreciation. When mortgage rates came down in December, we saw more buyers re-enter the purchase market. If mortgage rates don’t escalate in 2023, we could see enough demand to stave off price erosion.
- Buyers are afraid of higher interest rates and they shouldn’t be. Working with the right bank, you can get a great rate. Instead of looking at the mortgage rate, dig a little deeper into the other costs which will inform your monthly payment such as the common charges, real estate taxes or maintenance. Flexibility in what you are purchasing can also help. Are you willing to purchase a home where the baths and kitchen need an upgrade and don’t show well online. Such properties have not been in demand over the past few years and lower demand will yield a better purchase price for the buyer.
If you are curious about harnessing these trends to your advantage, reach out to me today. I would be happy to help you create a strategy for success.