The New York real estate market continues to serve as a testament to the U.S. housing sector. In addition to pacing the entire real estate landscape since the recovery initiated, New York City has become synonymous with today’s most desirable places to live. It is worth noting, however, that said demand isn’t without a significant caveat, or two: inventory can’t currently keep up with demand, and prices remain historically high. That spells great news for those that already own in The City That Never Sleeps, but what does it mean for someone that wants to invest there? Is real estate in New York a viable investment strategy? Better yet, what does the New York real estate market have in store for those looking to invest there in the future?
2017 New York City Real Estate Market & Trends
New York City Listing Prices & Home Values
According to Realtor.com, the median listing price in the New York, NY real estate market is $899,000. At just under the $900,000 threshold, New York isn’t only the most expensive city in the United States, but it’s tied with Copenhagen as the 10th most expensive city in the world, and you had better believe real estate plays a major role in its ranking.
The sheer size of New York City real estate market inevitably creates pockets of diversification, however. It is not uncommon for each individual neighborhood to represent its own micro real estate market. Therefore, the median listing price for real estate in New York isn’t necessarily the most accurate of barometers to base your opinion off of. Markets like Manhattan can certainly skew numbers higher. That said, it may be better for investors interested in the New York housing market to look at the city’s individual neighborhoods, as opposed to the metropolitan as a whole.
If you are interested in investing in New York City real estate, there are five neighborhoods — in particular — that warrant your consideration; they have exhibited an increased propensity for sales price growth. According to Street Easy, the following areas have experienced the largest sales price increases since last year around this time:
- Jamaica Estates, Queens: Jamaica Estates has a median recorded sales price of $435,440, which represents a 186% increase from last year.
- Clearview, Queens: Clearview has a median recorded sales price of $650,000, which represents a 132% increase from last year.
- Little Neck, Queens: Little Neck has a median recorded sales price of $607,500, which represents a 117% increase from last year.
- Midtown South, Manhattan: Midtown South has a median recorded sales price of $1,339,591, which represents a 107% increase from last year.
- Elmhurst, Queens: Elmhurst has a median recorded sales price of $692,500, which represents a 69.7% increase from last year.
Queens appears to have separated itself from the rest of the pack, as four of the top five neighborhoods with the most significant sales price growth reside in the Long Island borough; investors would be wise to remember that. If you are looking to invest in New York real estate, Queens may not be a bad place to start looking.
New York City Foreclosure Rates
Real estate in New York has been the beneficiary of an impressive recovery. As such, the lingering foreclosure crisis felt around the country wasn’t as pronounced in The City That Never Sleeps in 2017 as in years past. You see, as the recovery went on, equity returned to many places that once wondered if they would ever see it again. As a result, there are fewer homes in foreclosure at the end of 2017 than there were at this time last year. According to RealtyTrac, the New York metro currently has somewhere in the neighborhood of 924 homes in some stage of foreclosure — that means there are almost 1,000 homes that are either in default, going to be placed up for auction or bank-owned.
As recently as October, “the number of properties that received a foreclosure filing in New York, NY was 39% higher than the previous month and 19% lower than the same time last year,” according to the real estate information company. And while that number is shrinking, there are still plenty of opportunities for today’s investor’s to find and locate viable foreclosure deals for their flipping business — if they know where to look, that is.
For those of you looking to secure a foreclosure property for your next deal, your best bet is to look towards banks. The majority of New York’s foreclosures are, according to RealtyTrac, bank-owned. Otherwise known as real estate owned (REO) properties, bank-owned homes that have officially been repossessed from their previous owner represent 46.5% of all the metro’s foreclosures. That said, you may be able to procure your next foreclosure deal from a bank that is willing and able to part ways with inventory if the price is right.
After bank-owned REOs, pre-foreclosures make up 34.9% of New York’s foreclosure properties, which is actually down 21.1% from the previous year. And finally — last but not least — the smallest group of foreclosures are those that are up for auction (18.6%).
While New York remains one of the most expensive cities in the country, savvy investors still have options at their disposal; namely the options I just hit on. It stands to reason that if you know where the foreclosures are, you will increase your chances of landing a good deal at the right price.
New York City Rents
Practically setting the pace for the entire New York real estate market in 2017, rents have undergone more changes than perhaps any other fundamental housing indicator in the region. Most notably, are the drastic increases in rental asking prices New Yorkers have seen in the last seven years. Increasing at an annual rate of 3.9% since 2010, asking rents nearly doubled the rate in which median wages rose in the same period (1.8%). At that pace, asking rents more than tripled the 1.2% annual increase of subsequent goods and services in the last seven years.
There’s no doubt about it: Not unlike the rest of the country, asking rents in New York have been on a torrid climb. While asking prices in New York aren’t growing at quite the same rate of its West Coast counterparts (namely, Seattle and San Francisco), they are nothing to scoff at. “As of November 2017, average rent for an apartment in New York, NY is $3181,” according to Rent Jungle.
It’s worth noting, however, that the most interesting trend for New York real estate investors may not be in the substantial year-over-year asking rent increases, but rather in the different rates of each price segment — high end, low end and so forth. If for nothing else, there was a distinct differences in the rate of growth between rents on the higher end of the market and their lower counterparts. Going back nearly five years, a clear trend developed: rents on the lower end of the spectrum grew at a faster rate than rents on the higher end.
“Rents in the bottom fifth of the market have grown at an annual pace of 4.9% since 2010, whereas rents in the top fifth of the market have increased at an annual pace of 3%,” according to Street Easy.
As citizens of the City That Never Sleeps, asking prices are certainly a lot to take in, but there are always two sides to every coin. Those same asking prices that renters fear are an investor’s best friend. You see, when the market dictates higher asking prices, those that currently own passive income properties stand to benefit immensely, and 2017 was no exception. If you were renting out real estate in New York in the last year, or even seven, you probably had quite lucrative run.
It appears as if the time has come to temper our expectations of future asking prices. While those with passive income properties have enjoyed the ride for the better part of a decade, we may have seen the rental market peak. New York was fortunate enough to be able to add to existing housing inventory levels, effectively removing the leverage landlords received from a distinct lack of options. At the very least, supply and demand will tilt the scale closer to where renters would like to see it, and rents should scale down to keep pace with the market’s demand.
New York City Forecast
Inventory levels — or an inherent lack thereof — have hampered the recovery for the better part of a decade and seen to it that sellers had the upper hand. In fact, there’s no doubt about it: we are currently in a sellers market. Supply and demand have each contributed to today’s historically high prices. However, it appears as if times are change, thanks — in large part — to cities like New York. It is worth noting that the New York City real estate market is at the forefront of alleviating inventory issues. The City That Never Sleeps has placed a priority on bringing new homes to the market, and it looks like their efforts will pay off sooner rather than later. As a result, it’s safe to assume the historically high prices will come back down to earth, and the market will become more balanced.
Have you had any luck investing in New York City real estate in the past year? If so, feel free to let us know which exit strategies worked best for you in the comments below.