New York Real Estate Market Trends & Analysis
Statistics regarding the New York real estate market are skewed by the number of people living in New York City. Nonetheless, every indicator across The Empire State acknowledges the same thing: few places were hit harder by the Coronavirus than New York. In addition to New York's precarious situation in the wake of the pandemic, unemployment numbers suggest the entire state is lagging behind the national average. As a result, it's fair to assume real estate in New York was slightly less insulated from a downturn than its counterparts across the country.
There is no doubt about it: the New York housing market sustained a significant blow when "shelter-in-place" orders were issued by the government. Prices dropped modestly, already low inventory levels dropped even more, and sentiment reached its lowest point in years. It is worth noting, however, that the current environment isn't an indictment on the state, but instead a disruptive opportunity for local real estate investors. Temporary price drops, an exodus from large cities to the suburbs, pent-up demand, and even historically low-interest rates are cause for optimism. While it may be hard to see at the moment, the latter part of 2020 could wind up being a great time to invest in New York real estate.
The Top New York Real Estate Markets
While the best real estate market in New York is up for debate, here’s a list of the cities investors may want to pay special considerations to:
New York Real Estate Fees & Regulations
Real Estate
| Closing Conducted by: | Attorneys |
| Conveyance: | Bargain-and-Sale Deed |
Foreclosure Procedure
| Primary Foreclosure Method: | Judicial |
| Process Period: | 4 - 8 months |
| Notice of Sale: | Court |
| Redemption Period: | None |
Taxes
| Income Tax: | 4.0% - 8.82% |
| Corporate Tax: | 7.10% |
| Sales Tax: | 4.00% |
| Estate Tax: | 3.06% - 16% |
| Inheritance Tax: | No |
| Median Property Tax: | 1.23% |
| Property Taxes by County: | http://www.tax-rates.org/new_york/property-tax#Counties |
Average Transactional Costs
| Closing Cost: | $2,892.00 |
| Transfer Fee: | Mortgage tax 1.0%; Mortgage NY City 1% - 1.75%; Realty transfer NY City 1% - 2.625% |
| Origination Fee: | $2,109.00 |
Overview
Median Home Value: $328,677
1-Year Appreciation Rate: +2.3%
Median Home Value (1-Year Forecast): -2.2%
Median Rent Price: $3,200
Price-To-Rent Ratio: 8.5
Average Days On Market (NYSAR): 76
New Listings Year-Over-Year (NYSAR): +17.0%
Months Of Supply Year-Over-Year (NYSAR): -15.8%
Unemployment Rate: 15.9% (latest estimate by the Bureau Of Labor Statistics)
Population: 19,453,561 (latest estimate by the U.S. Census Bureau)
Median Household Income: $65,323 (latest estimate by the U.S. Census Bureau)
Percentage Of Vacant Homes: 10.50%
Foreclosure Rate: 1 in every 17,641 (0.5%)
Median Home Prices In New York
The Great Recession was responsible for tanking median home values on a national level, and New York was certainly no exception. As recently as 2012, in fact, New York’s median home value bottomed out around $253,000. It is worth noting, however, that was the lowest the state average would drop. Nearly halfway through 2012 home prices started to appreciate, and they haven’t looked back since.
Thanks to nationwide improvements in the economy, growing optimism and a lack of available inventory, prices in New York have enjoyed nearly a decade’s worth of growth. As a result, today’s median home value is somewhere in the neighborhood of $328,677, or 29.9% higher than where it was at the bottom of the last recession.
With an appreciation rate bordering on thirty percent, New York residents have had every reason to be optimistic over the recovery. However, it’s important to look at New York home values within a national context. Despite nearly a decade’s worth of appreciation, real estate in New York failed to keep pace with national trends. From the halfway point of 2012 (when the state of New York saw its median home value hit rock bottom) to today, the median home value in the United States appreciated 52.2%. That’s not necessarily an indictment on New York, but rather more indicative of how far the national real estate market had to go.
The New York real estate market appreciated at a slower rate than the national average over the last 12 months. Whereas the state of New York increased by 2.3% in the last year, the national real estate market was the beneficiary of a 4.1% increase. Moving forward, it appears as if New York will continue to lag behind the national average. Thanks largely, in part, to the impact of the Coronavirus on New York City, The Empire State is expected to have a harder time returning to pre-pandemic market conditions. Statewide, prices are expected to drop a modest 2.2%. The median home value in the United States is only expected to dip 1.5%.
The difference may be attributed to New York's high unemployment levels, as the lack of consumer confidence may have detracted from the buyer pool and lowered demand. While New York's spike in unemployment in April was on par with the national average, the state's unemployment rate has actually increased since then. National unemployment, on the other hand, has dropped 4.5% since the spike. With more economic uncertainty in New York than on a national level, it's reasonable to assume New York will need to make up more ground.
Fortunately, the ill effects brought about by the pandemic aren't expected to last forever. The setbacks New York experienced are only going to be temporary. The latest dip in prices probably won't last much longer, as the state's 4.8 months of available inventory have already started to stir up competition once again. The median sales price is already up 4.4% year-to-date, and there's no reason to think it won't continue rising as we distance ourselves further from the onset of the pandemic.
The New York real estate market experienced a significant setback; there is no denying that. However, the pandemic may have created a window of opportunity for those who were tired of seeing prices march higher each year. With prices down slightly from their 2020 highs, investors who get in now may benefit from appreciation by year's end.
Median Rent Prices In New York
The amount of money tenants can expect to pay in rent shares a direct correlation with local home values. Consequently, both increases and decreases in rental prices are almost always the results of home value fluctuations. There are, of course, exceptions to the rule, but rental rates typically share the same fate as home values. For better or for worse, home prices will impact the direction rental rates head, and the New York real estate market is no exception.
Thanks largely to the inclusion of New York City, rental rates in New York are considerably higher than national trends. Today, the average renter in the state of New York can expect to spend about $3,200 a month on rent, or approximately $38,400 a year. Of course, today’s rents are the result of years of appreciation in the housing market. No more than eight years ago, rents were as low as $1,653 a month.
Rent across the entire state has increased significantly for nearly a decade; so much so, in fact, that it is a lot more affordable to buy in New York than rent. With a price-to-rent ratio of 8.5, it is currently more affordable for people to own a home than to rent. Owning has become a lot more attractive, and a lot of residents are starting to trade expensive city living for its suburban counterpart. With many people working from home, a large portion of the workforce is no longer expected to work within close proximity to an office. As a result, more people are moving to the suburbs, which is already starting to drop rent prices and increase vacancy rates in big cities. There's a good chance rent will continue dropping in large cities for the foreseeable future, at least as long as prices are dropping and demand is shifting towards the suburbs.
New York Foreclosure Trends & Statistics
With one out of every 17,641 homes in some state of foreclosure (pre-foreclosure, bank-owned or reserved for auction), New York currently boasts a foreclosure rate of 0.5%. When compared to national trends, it would appear as if New York has an average foreclosure rate. The foreclosure rate for the entire country is now 0.7%.
In the last year, foreclosure filings across the United States dropped 81.0%. As recently as August, “the number of properties that received a foreclosure filing in U.S. was 11% higher than the previous month and 81% lower than the same time last year,” according to RealtyTrac. Over the same period of time, "properties that received a foreclosure filing in NY was 77% higher than the previous month and 86% lower than the same time last year."
There is no doubt that foreclosures have made up a lot of ground in one year's time (both on a state and national level), but the increase over the last month is hard to ignore. The toll of the Coronavirus is becoming more apparent, as the financial burden created by the spike in unemployment is leading to an influx of foreclosures. Maintaining mortgage obligations is becoming harder for many Americans, and the struggle is reflected in a 77.0% increase of foreclosure filings in New York between July and August. In particular, pre-foreclosures in New York (homeowners at risk of foreclosures) have shot up 257.7% from the previous month, and now represent 74.1% of the state's distressed inventory.
Statewide increases in foreclosure filings have led to disproportionate pockets of distressed inventory. As a result, select counties have developed a reputation for housing larger distributions of foreclosed properties. Here is a list of the neighborhoods with the highest distributions of distressed homes in New York:
Chenango: (1 in every 5,054)
Orange: (1 in every 5,896)
Nassau: (1 in every 7,360)
Putnam: (1 in every 7,716)
Suffolk: (1 in every 8,089)
The influx of foreclosures brought about be the pandemic is expected to continue. It is too soon to tell just how many more homes will become distressed, but one thing is for certain: the New York real estate investing community may be introduced to a much larger inventory of foreclosures in the coming months. Those who position themselves now and line up financing may be able to turn a bad situation into a good one.
Tax Lien Investing
Tax Lien or Deed: Tax Lien state
Interest Rate: 14% in counties that have sales
*NYC does not sell TLCs to public
Redemption Period: 3 years
Real Estate Investing In New York
The New York real estate market boasts several fundamentals working heavily in favor of investors. Not unlike the majority of the United States, New York real estate investors have enjoyed a lucrative run since the last recession. Real estate investors and homeowners across the country, in fact, have enjoyed several years of seller gains and attractive ROI (return on investment). According to Attom Data Solutions’ most recent Home Sales Report, the average home seller in 2019 “realized a home price gain of $65,500 on the typical sale, up from $58,100 last year and up from $50,027 two years ago.”
The report acknowledges that profits “represented a 34 percent return on investment compared to the original purchase price, up from 31.4 percent last year and up from 27.4 percent in 2017, to the highest average home-seller ROI since 2006.” Simply put, average U.S. home seller profits are higher than they have been in approximately 13 years. Consequently, the New York real estate investing community was not left out of the latest trend.
The median home value in New York is considerably higher than that of its national counterpart. As a result, the New York real estate investing community has seen profit margin potential take a hit. After nearly a decade’s worth of appreciation, far too many homes are simply too expensive to ensure profits on the back end of a deal. It is worth noting, however, that the same price increases that have eaten into potential profit margins have also led to more foreclosures. Therein lies the secret to New York real estate investing: distressed properties may simultaneously award investors with better profit margins and motivated sellers.
Pre-foreclosures represent the overwhelming majority of New York's distressed inventory, which means investors will want to pay special considerations to homeowners who may be behind on payments. Doing so will increase their odds of landing a deal below market value, as tapping into the largest pool of distressed homes will tip the scales in their favor.
Investing in New York has gotten more expensive in recent years, but that doesn’t mean deals can’t still be found. Tapping into the distressed property market is the best way to increase one’s chances of landing a deal with good profit margins, which begs the question: Is now a good time to invest in New York real estate? Better yet, what should investors do with the assets once they are acquired? What exit strategies appear to be working best in the New York real estate market?
To be clear, the New York real estate market is firing on all cylinders at the moment. Nearly every exit strategy is in play, but there’s one that makes more sense than all the others: rental properties. While it’s entirely possible to make profits rehabbing and wholesaling, the higher acquisition costs associated with 2020 have made attractive profit margins harder to come by. Instead, investors should look into building a rental property portfolio. Three market indicators, in particular, are working heavily in favor of New York landlords at the moment:
Interest rates on traditional loans are historically low
Years of cash flow can easily justify today’s higher acquisition costs
The price-to-rent ratio suggests high home prices will increase rental demand
As of August, the average rate on a 30-year fixed-rate loan was 2.94%, according to Freddie Mac. August also represented one of the lowest average mortgage rates ever, and the Fed announced its intentions to keep rates low for the foreseeable future. As a result, lower borrowing costs have brought down acquisition costs for those looking to add to their passive income portfolio. At their current rate, mortgage rates will save today’s buyers thousands of dollars, and real estate investors will be able to pad their bottomline.
In addition to lower borrowing costs, landlords may be able to benefit from attractive cash flow. Let’s say, for example, buyers were to us a 30-year fixed-rate conventional mortgage with a 2.94% interest rate (the average rate for a 30-year fixed-rate loan) to buy a home for $328,677 (the median home value in New York). In the event they are able to put down $65,000 (about 20%), monthly mortgage payments would come out to be somewhere around $1,668. Subsequently, the median rent price in New York is $3,200. While these numbers are simply averages, the potential remains very real. It is entirely possible for New York real estate investors to pay off their mortgages with other peoples' money.
New York Housing Market Predictions
The New York housing market has enjoyed nearly a decade’s worth of good news. For seven consecutive years, real estate in New York has been able to ride the wake of national trends, albeit to a tempered extent. Price increases, confidence in the market and several other indicators are heading in the same direction as the rest of the country, but what does that mean moving forward? What can the New York real estate investing community expect for the foreseeable future?
Buffalo should see an influx of buyers: With a median home value of $105,695, the Buffalo real estate market is priced well below the New York average. In fact, real estate in Buffalo is approximately one-third the price of the state average. As a result, it’s reasonable to assume Buffalo will see an influx of buyers in the coming year, most of whom are looking to escape the higher prices associated with New York City and White Plains. Added interest has already helped homes in Buffalo appreciate more than the state average in the last year, and it looks like Buffalo will continue the trend for at least another year. Now may be a better time than ever to consider investing in Buffalo real estate.
New York appreciation will trail national trends: The median home value in New York is about $80,000 more than the national average. Consequently, real estate in New York has very little room for further increases. As a result, it’s safe to assume the national real estate market will appreciate at a faster pace over the next 12 months. That’s not to say this is a new trend, but rather that the difference will extend into 2020, and beyond.
More people will move to the suburbs: The Coronavirus has forced many people to work from home for the better part of 2020, which is starting to reduce the dependance on living close to an office. As a result, more people are already starting to leave big cities in search of lower-priced homes in the suburbs. The exodus will most likely create a void in cities like NEewYork, where rental prices will probably drop and vacancies will probably rise. The shift could mean a lot more activity for investors in secondary cities.
New York Real Estate Market Summary
The New York real estate market has enjoyed several years at the forefront of the U.S. housing sector. As one of the largest and most influential markets in the country, New York has helped set the pace for the greater part of the national recovery. In doing so, The Empire State has become a commodity to the national real estate investor industry. Investors from around the globe, in fact, have found New York to be a great place to invest for those who can afford to do so. That said, the Coronavirus has taken its toll, and real estate in New York will need to overcome more than the rest of the country. The lull, however, may be just what investors need to get going again.
Sources:
https://www.nysar.com/wp-content/uploads/2020/08/NYSAR_MMI_2020-07.pdf
https://www.zillow.com/ny/home-values/
https://www.zillow.com/home-values/
https://www.realtytrac.com/statsandtrends/ny/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/ny/
https://www.realtytrac.com/statsandtrends/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.census.gov/quickfacts/NY
https://www.bls.gov/eag/eag.ny.htm
https://www.nerdwallet.com/mortgages/mortgage-calculator/calculate-mortgage-payment/new-york
attomdata.com