Since the turn of the decade, New York City’s real estate market has heavily favored the seller. As the national housing bubble grew, New York City was seen as a market wherein growth in demand not only outpaced most of the rest of the country but was so strong that, even in the face of a declining national housing market, prices would continue to rise.
These predictions turned out to be accurate: As housing markets across the country became burdened by the subprime crisis in 2007, New York City’s housing prices continued to climb. Indeed, in the 3Q of 2007, the value of the housing market grew approximately 3.9%, a rate that outpaced every housing market in the country.
As 2008 approached, however, the market began to show signs of its long-term connection to the national housing market. Though reliable 4Q numbers are not yet in, it is a near-unanimous consensus among brokers and other professionals that the market has shifted in the direction of the buyer. Whereas sellers were previously unlikely to even consider selling a home below the listing price, a new power structure, labeled a “buyer-seller detente” by the New York Times, has come into existence during the last quarter of 2007.
While the New York City market is not yet a buyer’s market, it seems to be moving in that direction. The national economic outlook for 2008 looks bleak. Growth in the gross domestic product is expected to be less than 2%, which is not considered adequate to sustain current employment levels. More importantly, the subprime crisis is expected to lead to hundreds of thousands of foreclosures each quarter through the end of 2008.
Fortunately, New York City’s housing co-ops have largely sheltered the city from the direct effects of the subprime crisis. However, weaknesses in the national economy and housing market are expected to dampen growth in the city’s housing demand for much of 2008.
The weakened dollar, however, has to lead to a significant increase in foreign demand for New York City housing. As the dollar is expected to continue to decrease in value against most major currencies, foreign demand is only expected to rise further, as those holding Euros and Pounds can purchase homes in New York City for a fraction of what they would have cost just several years ago.
Combined with medium and long-term forecasts of strong economic growth in the city, the uptick in foreign demand makes it a likely that 2008 will be the low point for New York City housing prices. After a year or so of prices remaining relatively flat, it is likely that they will begin growing at a rapid pace in 2009.
Finding and purchasing a home, however, is the single lengthiest act most consumers will ever engage in. If consumers begin their search for a home in the early part of 2008, it is likely that they will end up purchasing a home when the market is near its lowest point, with significantly increased in value likely in the near future.