NYC’s hot housing market is looking at a recession in 2022

NYC's hot housing market is looking at a recession in 2022

It was a flag year for New York City’s residential real estate market, but all good things must come to an end.

By October, Manhattan contracts had surpassed the previous record of 12,520 in 2013, according to real estate data company UrbanDigs. The company’s data dates back to the 2008 financial crisis. With just two weeks to go, closings hit 14,774, more than double the 2020 total.

That inventory is depleted, even though the list grows. The report found that, through December 5, the listings exceeded the 2008-2018 average by 18 percent. However, buyers have increased supply at an even faster rate, bringing net new inventory to below zero for the ninth nine months of this year. In November, net new inventory – monthly new listings, excluding signed contracts and off-market listings – was negative 861 units.

Prices have increased in tandem. For the first time since mid-2015, listing discounts have declined continuously during the year due to increased buyer-side competition, the report noted. The luxury sector — units priced at $4 million or more — has underpinned that performance, marking its best year since 2014. Buyers have spent more than $14 billion so far in 2021. , up 19% from the previous record.

But UrbanDigs co-founder John Walkup predicts less disturbance in the first quarter of 2022.

“The number of transactions may slow down during the holiday season, especially with fewer units hitting the market,” he wrote, noting that next quarter could be significantly slower than the current quarter. .

“Slowing sales could cause inventories to build up, putting pressure on prices,” Walkup added, noting that prices for luxury deals could “be quiet for several quarters into 2022.” .

Walkup’s predictions contradict those of Chairman and CEO Miller Samuel Jonathan Miller. Thinking about latest market reports for Douglas Elliman, showing deals in Manhattan and Brooklyn far ahead of the listings. Miller said he expects the trend and its impact on prices to stabilize.

Miller told The Real Deal: “Inventories are continuing to fall and that’s why we expect prices to continue to rise in the new year.

Walkup indicates the possibility that the Federal Reserve will raise interest rates – Wall Street Journal report it could do so as early as March — possibly “putting a higher cap on apartment prices, with premium prices and new development dropping first.” He assures that the lull in luxury goods will be “nothing too harsh”, estimating discounts ranging from 0 to 5%.

The report highlights that, while it’s far from a comparison between apartments as an asset class, it lags behind the S&P 500’s outperformance. The index hit a record 67th high last week, Wall Street reported. Street Journal report.

The stock market and real estate values ​​both took a hit during the 2008 financial crisis. Stocks, however, historically a more volatile asset class, made an impressive comeback. than.

The S&P 500 is up 230 percent from January 2008 and has posted most of its gains over the past two years; Meanwhile, the price per new apartment in Manhattan has increased 68 percent since 2008, UrbanDigs said.

“The buoyant activity observed in the NYC property market since the reopening has yet to translate into anything close to the gains seen on the broad equity index,” said Walkup. bigger,” said Walkup. That said, you can’t live in a stock portfolio.

With interest rates spiked, condominiums could continue to appreciate in 2022 when the most recent wave of purchases was recorded, Walkup said.

Interest rates can also influence foreign investors’ buying decisions. If the Fed proceeds to raise rates, it will further strengthen the US dollar, which rose to a 16-month high in November, Barron’s report. That weakens the purchasing power of people whose wealth is denominated in other currencies.

That could deter foreigners from buying real estate in the US in 2022 and entice some to liquidate their existing assets, Walkup said. “The year 2022 could be the year of foreign sellers,” he wrote.

New York City brokers prepared for a stream of foreign buyers before travel bans were lifted in 33 countries last month.

The Omicron variant and new travel bans have cast that into doubt. However, the recovery in the overseas market, following the news that the symptoms related to the variant were mainly bland among vaccinated individuals, suggesting that investor fear is waning. The Biden administration’s travel ban applies to seven countries in southern Africa.

“Overall, I think the travel ban is back in effect [profit and loss] Walkup said in an email. “So while the lifted travel ban could certainly stimulate some activity, if NYC’s investment returns are deemed suboptimal due to currency or price fluctuations, people Foreign buyers will look elsewhere.”

On a more granular level, Walkup expects continued strong demand for townhouses and renewed interest in home remodelers.

In 2021, the average monthly sale of Manhattan townhomes is up nearly 50 percent, compared with the 2008 to 2018 average, Walkup said. The market is likely to remain hot as buyers continue to follow. Pursuit of space and privacy, inspired by the pandemic. He sees sales and prices continue to rise, especially in Downtown, where more and more housing is available, depleting inventory.

However, the demand for renovating units may be dwindling. In October, UrbanDigs released a report outlining the nearly 30% split between the prices of renovated apartments and those making repairs. Labor shortages and soaring raw material costs, due to supply chain problems, have pushed buyers away from properties in need of extensive renovations.

Walkup says that by 2022, the disparity between renovated and non-upgraded units could narrow, as tight supplies force buyers to opt for units that need some TLC. NYC’s hot housing market is looking at a recession in 2022

Dais Johnston

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