G+ December 2024 Market Update (Copy)
Market Report: NYC Real Estate A year in review and a forecast with GROWTH
Currently, the NYC real estate market is holding steady despite shifting economic conditions and inflationary interest rates. As of September 30, 2024, the average home value in New York City was $757,540, reflecting a moderate 2.1% year-over-year increase. On average, homes in the city are spending 68 days on the market before going under contract, suggesting a more deliberate pace of transactions as buyers weigh affordability.
The surrounding New York-Newark-Jersey City metro area tells a slightly different story, with the average home value at $672,829—a robust 7.0% year-over-year increase. Homes in the metro area are moving much faster, with an average of just 28 days on the market. This suggests stronger demand in suburban areas, likely driven by affordability and lifestyle preferences as some buyers seek more space for their money.
What’s Driving the Market?
Interest Rates: With mortgage rates remaining high, many buyers are reevaluating their budgets, causing some slowdown in demand. However, any easing of Federal Reserve policy could quickly ignite a surge in activity, especially in high-demand neighborhoods.
Inventory Levels: NYC has 16,335 homes for sale, with 2,653 new listings as of late September. These figures highlight the city’s inventory challenges, keeping competition high for available homes and sustaining price levels.
Luxury Market Trends: The luxury sector remains a bellwether for broader market health. While sensitive to economic shifts, NYC’s high-end properties continue to attract domestic and international buyers, reflecting the city’s enduring appeal.
Economic Conditions: Indicators such as employment rates and consumer confidence are critical. The strength of NYC’s local economy remains a stabilizing factor, even as national trends point to potential economic cooling.
Where Are We Headed?
Of note, for the first time in a decade, we are feeling bullish about Manhattan/Brooklyn real estate, and here’s why -
While regional home prices have grown more robustly than the relatively flat 2% in Manhattan, unlike other major markets teetering on bubble risks, Manhattan’s countercyclical nature and surprisingly undervalued prices make it a unique opportunity for growth.
In 2025, the New York City real estate market might finally hit its stride after nearly three years of decline. What’s in store for Manhattan and Brooklyn? Drawing on the trends from late 2024, here are five predictions that will define the year ahead:
#1: More Buyers
This past fall ended as the most active fall season since 2021, bucking nearly two-and-a-half years of sluggish trends triggered by rising mortgage rates starting in early 2022. This year’s fall capped a pivotal shift, with sentiment indicators, such as the ratio of successful to unsuccessful listings or the ratio of demand to supply, which often leads prices by about six months, beginning to climb in May and slowly rising throughout the year. Just as importantly, liquidity, as measured by the rolling 30-day pace of contracts signed, finished November 36% higher than last year and 33% higher than 2022, suggesting the return of buyers to the market is not just a temporary blip. With 2024 finishing on a high note, expect spring 2025 to continue the resurgence of buyers.
#2: Fewer Sellers
Spring has traditionally been Manhattan’s busiest season for new listings, but a flood of inventory in 2025 seems unlikely. While spring will naturally bring an uptick in activity, the lukewarm listing trends seen during the latter half of 2024 suggest the volume of new sellers will likely hover around the typical seasonal average. This restraint isn’t too surprising as many sellers, who may still be cautious after years of market uncertainty, may prefer to wait for a solidified surge in demand before listing.
On the flip side, buyer activity is expected to remain strong, especially as pent-up demand carries over from 2024’s active fall season. If demand outpaces supply, leverage could shift firmly toward sellers. This dynamic could create a more competitive environment for buyers, particularly for renovated or well-priced homes, in which the decision-making timespan is compressed.
#3: D-I-Why Not?
After years of paying steep premiums for move-in-ready homes, buyers may rediscover properties with renovation potential. With costs and construction timelines stabilizing, rising prices could make fixer-uppers increasingly attractive. 2025 could see a renewed appetite for homes that need work. The renovation premium, which soared to nearly 30% during its post-pandemic peak, has been gradually returning to its historical average of around 14%.
This shift suggests buyers may be recalibrating their priorities, willing to exchange immediate convenience for the opportunity to add value over time. For intrepid buyers, homes with “good bones” and “potential” may now present the best bang for the buck, especially as prices begin recovering.
#4: Rents Remain (Too) High
The recently passed FARE Act, which stipulates that the party who hires the rental broker is responsible for paying the broker’s fee, sparked hopes of cooling the rental market by reducing transactional friction. However, the reality is more nuanced. While the new rules may alter how fees are paid, they don’t address the underlying issue, which is a perennial and persistent lack of significant new rental supply.
Without an influx of new inventory, demand will continue to push rents higher, especially in competitive markets like Manhattan and Brooklyn. Renters should prepare for another summer of near-record-high rents, with fierce bidding wars for desirable units remaining the norm. For renters, the advice for 2025 is search early, search often, and act quickly.
#5: Prices Will Rise
Keep an eye on prices in 2025. If stronger buyer activity and tighter inventory continue to align with last summer’s bullish reversal in sentiment indicators, Manhattan and Brooklyn may see steady price growth throughout the year. While the increases are unlikely to be dramatic, they will reflect a market regaining its footing, buoyed by renewed confidence and resilience. Rather than the volatility of previous years, 2025’s pricing trends are more likely to show measured, predictable gains more reflective of a healthier market. For sellers, this stability offers a chance to achieve a reasonable exit in a reasonable time as buyers can finally move forward with some clarity on market direction.
2025 In Growth Mode
Real estate trends evolve slowly, but recent activity suggests 2025 is shaping up to be a year of revitalization for the Manhattan and Brooklyn markets. While higher mortgage rates and limited supply remain challenges, growing buyer confidence and adaptability are driving the recovery. If 2024 marked the beginning of recovery, 2025 is poised to transition into growth mode. After nearly three years of frustration, sellers are well-positioned to find buyers, and buyers can take comfort in increased market activity and gradually rising prices. Though high rents pose concerns, they underscore strong demand, further supporting the expectation of heightened activity this spring. Looking ahead, the 2025 market in NYC will be one of renewed energy and opportunity for all participants.
