While stubbornly high mortgage rates get the most press, New Yorkers had a moment a few weeks ago when congestion pricing took center stage. Would it negatively impact certain neighborhoods? Would it make certain parking lots explode in value? Would no one care?
Well, it didn’t take long for congestion pricing to face significant pressure. I am not the only one delighted to see it probably going away, or at least recede into the background for a little while as its legality winds through the court system.
And further, it’s one fewer excuse to keep New Yorkers from pursuing their real estate dreams in 2025. There are at least four other things which will propel the New York City market forward in 2025. Let’s look at those, too.
Number One: Return To Work
I believe this is the most important shift we’re seeing right now that will help underpin the housing market in New York City. Just as the “death of the office” spelled a few years of difficulty in the housing market, its return bodes well for housing. I don’t care if it’s only four days a week versus five. If people need to be in New York all the time (Jamie Dimon certainly thinks so), they can’t live full-time upstate. I realize this could cause some significant challenges for those who took to work-from-home and love it, but it will help NYC thrive in the near future. That means both a stronger rental market and a stronger sales market.
Number Two: Liquidity
Even after two decades selling real estate, I have been shocked in the past three years about the amount of liquidity in the pockets, bank accounts and brokerage accounts of homebuyers in New York. When 60% of buyers are paying all-cash for their properties, and sales volume is on the uptick, it simply means there is a pool of asset-rich prospective buyers who will not only buoy the market, but ride it until prices solidify- which seems to be happening now.
Number Three: Wall Street Bonuses
While Wall Street’s impact on the real estate industry has ebbed somewhat, replaced by Tech and other sectors, a wallop of bonuses is about to hit the real estate market. When outlets are reporting the strongest bonus season since 2021, buyers won’t be far behind.
Number Four: Limited Inventory in the Suburbs
It’s remarkable how often the NYC housing market operates so differently from the rest of the housing market. Sometimes the reasons are easy to discern, such as that people simply want to be in New York. Other times, people don’t want to be in New York, but they have little or no choice in the matter. Mortgage rates may not be playing the same outsized role in NYC housing decisions, but they sure are in the suburbs.
For that reason, inventory remains incredibly low in the suburbs, and would-be buyers simply have nothing to choose from. This backlog of buyers has strengthened the rental market for the last few years. But from my conversations with those who wish they could move to the suburbs, there is a knock-on effect I am starting to see: People are just going to buy in Manhattan in the meantime. They want to grow their equity, they feel the market here is well-priced, and they can’t stomach paying high rents forever. This kind of demand is not going to drive the housing market in NYC, but it’s not exactly in the trunk, either.
Number Five: Limited Luxury Rental Inventory in the City
Just like NYC’s City of Yes isn’t going to create the volume of affordable housing that is so sorely needed, there isn’t even enough unaffordable housing. That is, luxury housing is limited, too. This is a bit of a trickle-down impact, but as rental inventory remains low, at some point rents grow to the point where those running their numbers take the plunge into the sales market. We’re see it already.
Number Six: Cheap Co-ops
Lastly, I’ve been ringing this bell for some time now. Sure, I just wrote a post talking about a wonderful couple who chose to spend $11mm for a new condominium instead of $7-8mm co-op. But that decision isn’t available to everyone. In fact, many buyers are looking at co-ops the way that Warren Buffett eyes value stocks. So many buyers have been sitting on the sidelines. So many buyers have been looking at co-ops and wondering what’s wrong with them. Why do they take so long to sell? Why are they priced so well, when they’re in the best locations?
My answer: They’ve been unloved, but I don’t think this will last much longer. Of course, that might not stop co-op boards from making sales difficult, but once you add the items above: Qualified, liquid buyers who must live in New York to be close to work. Buyers who can’t find anything to buy in the suburbs, nor decently-priced rentals, buyers who have new money in their pockets from bonuses, etc etc…The conditions are ripe for a whole host of them to start buying.
So start your engines- the Spring market is about to take off. Mark my words- Scott & Magnetic
