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In Real Estate Industry

 

New York City is a hot sellers’ market with steep home prices and appreciating home values, but the greater New York metro is a buyers’ market, where inventory is high and competition to purchase homes is low. The median home value in the New York metro is $382,900, far below New York City’s $553,900 but still more than double the national median of $178,500. Overall, real estate in the New York Metro is still a leading U.S. market because it’s such a desirable location near the center of business, fashion and diversity. 

Housing Crisis Effects

The Great Recession hit all U.S. housing markets, including New York City. As a result, U.S. home values plummeted nearly 20 percent from their peaks in 2007 to market lows in 2012. Across all New York City demographics, home values fell an average of 19 percent from the height of the market to the bottom in 2012. Since the crash, home values significantly recovered among most markets. On average, homes values in New York City are just 3.6 percent below their peak prices from 2007. In fact, homes in Asian communities are 13.8 percent above their peak prices while homes in Hispanic areas are still 13.6 percent below peaks.

 

Distressed Properties in the New York Metro

One of the effects of the Great Recession was widespread negative equity. As all home values depreciated, owners owed more on their properties than they were worth. In the New York metro, 13.6 percent of homes are still underwater. The result of dramatic negative equity for many homeowners across the nation was foreclosure. To get out from under their properties, owners stopped paying their mortgages. Currently in the New York metro, 1.5 homes are foreclosed per 10,000 homes. This foreclosure rate is significantly lower than the national figure of 4.0 homes per 10,000. On the other hand, many current owners in the metro are delinquent on the mortgages, 18.9 percent, which is the first step in the foreclosure process. New York metro residents are defaulting at a dramatically higher rate than median U.S. homeowners with a mortgage delinquency of 6.4 percent. This steep delinquency rate could lead to additional foreclosures throughout the coming months.

 

Selling homes for a loss is seemingly a good option for these underwater and delinquent owners, especially since home values are nearly recovered, but these displaced owners would likely inject themselves into New York’s outrageously expensive and competitive rental market.

 

Rents in the New York Metro

Currently, renters in the New York metro pay a median monthly cost of $2,331. Renting in the metro is slightly more expensive than New York City’s $2,209 but far above the national cost of $1,350. In the past year, rents in the metro rose 2.1 percent, making living in New York an increasingly costly option. Plus, on a national scale, income growth has not kept up with rent increases, limiting affordable rent options for all residents.

 

Rents grew nearly twice as fast as wages since 2000, causing renters to pay roughly 30 percent of their income on rent. Although the breakeven horizon in New York is 2.5 years, meaning residents who plan to live in the area for a minimum of 2.5 years will find owning more cost efficient than renting, most renters will not be able to purchase a home soon if 30 percent of their income goes to rent. Saving a 20 percent down payment in the New York metro requires $76,580 – a steep sum to save with little disposable income to allocate toward savings.

 

Housing Confidence in the New York Metro

Regardless of this imbalance in wages and rent prices, renters across the country are beginning to feel more confident about purchasing homes within the next year due to recent improvements in their local housing markets. Home values increased 5.4 percent across the country in the last year. Among U.S. renters, 5.2 million expect to buy a home in 2015, which is up from 2.2 million last year. This aspiration to buy was particularly strong in the first half of 2014 and stayed flat for the remainder of the year.

 

A recent study by Zillow surveyed renters in 20 major U.S. metros and found that renters in eight of the metros plan to buy a home within 2015, nine metros experienced declining homeownership aspirations and three metros had flat results. In New York, renter aspirations to buy this year remained flat. In three of the New York subsects studied, renter confidence remained flat (young adults, low income and blacks) while Hispanics’ confidence decreased. So, even though the New York metro is a buyers’ market, current renters are not likely to snatch up homes at a faster rate than last year.

 

Housing Predictions in the New York Metro

market new york 2

As can be seen, home values in the New York metro, the city and the country should see continued appreciation throughout the next year. Nationwide, home values rose 3.3 percent in the last year and should see 5.4 percent growth through 2015 – that’s a slowed yet sustainable growth rate for a healthy housing market. In the New York metro, home values appreciated 3.7 percent in the past year and are anticipated to grow another 0.6 percent within the year – the slowest growth rate of these three markets. New York City specifically experienced 8.2 percent home value increases since January 2014 and should see another 2.3 percent growth by 2016.

 

If you’re considering buying a home in New York within the next year, the best opportunity lies in the New York area, outside of the city center. There, it’s a buyers’ market with inventory to select your dream home, room for negotiation and lower listing prices. Appreciation of New York City homes will occur faster, but inventory is low, competition is fierce and prices are steep.

 

by The Power Is Now Research Team 

Reference

www.zillow.com

 

 

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