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 The Empire State. In addition to New York's precarious situation in the wake of the pandemic, unemployment numbers suggest the entire state lags 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 that the New York housing market sustained a significant blow when the pandemic hit. Prices dropped modestly, already low inventory levels dropped even more, and sentiment reached its lowest point in years. However, it is worth noting that the current environment isn't an indictment on the state but instead a disruptive opportunity for local real estate investors. An exodus from large cities to the suburbs, pent-up demand, increasing home prices, and even historically low interest rates are cause for optimism. While it may be hard to see at the moment, 2021 could wind up being a great time to invest in New York real estate for those who listen to the correct indicators.
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 |
New York Housing Market Overview
Median Home Value: $371,880
1-Year Appreciation Rate: +12.3%
New Listings: 60,884 (+42.2% year over year)
Pending Sales: 46,954
(+65.6% year over year)Closed Sales: 34,967 (+51.8% year over year)
Days On Market: 63 (-18.2% year over year)
Median Sales Price: $369,900 (+32.1% year over year)
Average Sales Price: $483,262 (+26.5% year over year)
Inventory Of Homes For Sale: 42,598 (-21.0% year over year)
Months Of Inventory: 3.0 (-43.4% year over year)
Median Rent Price: $1,509
Price-To-Rent Ratio: 20.66
Unemployment Rate: 7.7% (latest estimate by the Bureau Of Labor Statistics)
Population: 19,453,561 (latest estimate by the U.S. Census Bureau)
Median Household Income: $68,486 (latest estimate by the U.S. Census Bureau)
New York Median Home Prices
The Great Recession was responsible for tanking median home values nationally, and New York was certainly no exception. As recently as 2012, in fact, New York’s median home value bottomed out at 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 $371,880, or 46.9% higher than at the bottom of The Great Recession.
With historical appreciation rates on the books, New York residents have had every reason to be optimistic over the last ten years. 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 78.8%. 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 has also appreciated at a slower rate than the national average over the last 12 months of the pandemic. Whereas the state of New York increased by 12.3% in the last year, the national real estate market was the beneficiary of a 15.0% 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.
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 resulting from the pandemic was on par with the national average, the state's unemployment rate has had a harder time returning to pre-pandemic levels. At 7.7%, New York's unemployment rate is about half of when it spiked in 2020. However, the national unemployment rate is a modestly better 5.9% and has made up more ground since peaking last year. 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.
Nonetheless, unemployment is improving across the entire state. In conjunction with supply and demand constraints, improving buyer sentiment will continue to drive home values in the Empire State higher for the foreseeable future. In fact, with just three months on inventory, the New York real estate market will see competition increase dramatically as long as listings remain hard to find and more people get hired.
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 buyers. Despite higher prices, historically low interest rates will help offset acquisition costs and perhaps even help more people move into their dream homes.
New York Median Rent Prices
New York’s home prices share a distinct correlation with every single housing indicator, and rent prices are certainly no exception. You can very easily attribute New York’s higher rental prices to the state’s above-average home values. If for nothing else, higher home values are preventing a large population of prospective buyers from actually committing to a purchase, if not pricing them out of the market altogether. In other words, there’s a large contingent of people that want to buy but can’t, which lends itself to another issue: the same supply and demand crisis facing would-be buyers is impacting renters. Since more people are priced out of the buying market, we see more renters than average competing over fewer available properties. As a result, landlords have found themselves in a position of power in New York and increased their asking rates.
According to Apartment List, the median rent price in New York is $1,509. The difference between individual unit sizes can be broken down as follows:
Studio: $1,403
1 Bedroom: $1,452
2 Bedroom: $1,511
3 Bedroom: $1,671
4 Bedroom: $1,753
Comparatively, the national average rent price is $1,219 (less than the cost to rent a studio apartment in New York). The difference is noticeable, and data suggests the discrepancy will only grow for the foreseeable future.
As I already alluded to, more people are forced to rent because they can’t afford to buy, but there are also very few units to rent on the market. Therefore, landlords are in a position of power and can request higher rates. New York real estate investors should take note. As it turns out, now is a great time to consider buy and hold exit strategies. While it makes it more difficult to acquire properties, it’s more than likely that you’ll be able to rent out an asset to recoup some of the money lost on the acquisition.
New York Foreclosure Trends & Statistics
According to Attom Data Solutions’ Q1 2021 U.S. Foreclosure Market Report, a total of 33,699 U.S. properties received a foreclosure filing (default notices, scheduled auctions, or bank repossessions) in the first quarter of this year. According to the latest research, nationwide foreclosures are up 9.0% from the last quarter of 2020 but down 78.0% from this time last year.
“The foreclosure moratorium on government-backed loans has virtually stopped foreclosure activity over the past year,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But mortgage servicers have been able to begin foreclosure actions on vacant and abandoned properties, which benefits neighborhoods and communities. So it’s likely that these foreclosures are causing the slight uptick we’ve seen over the past few months.”
To be clear, there isn't a single state that's not expected to see an influx in foreclosures shortly. However, there's a good possibility the New York real estate market will experience an increase after most of the other states. If for nothing else, foreclosures simply take longer to process in New York. States with the longest average foreclosure timelines for properties foreclosed in Q1 2021 were Arizona (1,939 days), New Jersey (1,764 days); New York (1,691 days); Pennsylvania (1,654 days); and Hawaii (1,650 days)," according to the Foreclosure Market Report.
The lengthier timeline and the CARES Act mortgage forbearance program may help more homeowners get back on their feet. Therefore, real estate investors in New York should position themselves to help distressed homeowners in the future, but the time horizon will be a little longer than in most other states.
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
New York Real Estate Investing
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). New York City, in particular, has skewed the profits investors have made on a statewide level. More specifically, no other city in the country saw investors make more raw profits in the first quarter of this year.
"The highest raw profits in the first quarter of 2021, measured in dollars, were again concentrated in the West, Northeast, and South. Among metro areas with enough data to analyze, the top 20 all were in those regions, led by New York, NY (gross profit of $166,375); Pittsburgh, PA ($152,041); Los Angeles, CA ($145,000); San Francisco, CA ($139,250) and San Diego, CA ($136,000)," according to Attom Data Solutions' first-quarter 2021 U.S. Home Flipping Report.
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 2021 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 June, the average rate on a 30-year fixed-rate loan was 2.98%, according to Freddie Mac. 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 bottom line. More importantly, lower mortgage rates mean lower monthly payments, which means landlords can increase their monthly cash flow from properties placed in operation.
In addition to lower borrowing costs, New York's 20.66 price-to-rent ratio suggests it is much more affordable to rent than to own. The value associated with renting in today's market will undoubtedly increase rental demand. Not only does the state's three months of inventory make it difficult to buy a home (even if buyers have the money to do so), but more people will be forced to rent. The resulting demand will enable landlords to increase rental rates and ultimately help to justify today's higher acquisition costs.
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 $186,970, the Buffalo real estate market is priced well below the New York average. In fact, real estate in Buffalo is approximately half 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 2021 and beyond.
More people will move to the suburbs: The Coronavirus has forced many people to work from home for more than a year, starting to reduce the dependence on living close to an office. As a result, more people are already starting to leave big cities searching for lower-priced homes in the suburbs. The exodus will most likely create a void in cities like New York, where rental prices will probably drop, and vacancies will probably rise. The shift could mean a lot more activity for investors in secondary cities.
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.apartmentlist.com/research/category/data-rent-estimates
https://www.zillow.com/buffalo-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
http://www.freddiemac.com/pmms/pmms30.html
https://www.nysar.com/wp-content/uploads/2021/07/NYSAR_QMI_2021-Q2.pdf
https://www.nerdwallet.com/mortgages/mortgage-calculator/calculate-mortgage-payment/new-york
attomdata.com
https://www.bls.gov/news.release/pdf/empsit.pdf
https://www.attomdata.com/news/market-trends/foreclosures/attom-data-solutions-q1-and-march-2021-u-s-foreclosure-market-report/
https://www.attomdata.com/news/most-recent/q1-2021-u-s-home-flipping-report/