Is Now a Good Time to Buy a Home in New York City?

A while back, we looked at NYC’s residential market and how it’s sharpening up in the last months of 2019. As we approach the end of the year, it’s looking like prices are now at or very near the bottom. Prices have fallen all over the board, and sellers are slowly coming to this new buyer’s market reality. But unfortunately, many buyers choose to dig their heels in and wait to see how low prices will go.

Some industry experts believe that prices have either reached the bottom or are very close to it, with the expectation being that this quarter will see stabilization and regrowth. There’s also talk of a possible recession, making some buyers skittish. But digging in for too long could risk losing out on an opportunity.

So what’s the best course of action – should you buy now or later? As with most real estate, the answer is that it depends on what you’re looking for. So let’s look at the different kinds of properties on the market now, what they’re going for, and how you can position yourself as a buyer to get the best deal possible.

It is a Major Buyer’s Market

It is a Major Buyer’s Market Right Now for 2-Bedroom Apartments. Of course, it would be absurd to call $1,515,000 for a two-bedroom apartment a bargain in most markets. But that number represents an 8% drop from the median price last year. Moreover, the recently published Q3 report by Douglas Elliman found that Manhattan prices had fallen all across the board in the condo and co-op sector when compared to figures from the same period last year. Only the 4-bedroom-and-up market fell further with a 17% drop.

While this price is still out of reach for many New Yorkers, there are increasing options for first-time; move-up buyers at far lower prices than the median price suggests; historically low-interest rates are allowing buyers to stretch their dollars further, as seen in the fact that this quarter also witnessed more people than average purchase with the help of a mortgage. Unfortunately, the glut of high-end properties that just aren’t selling is also putting 2-bedroom sellers in an awkward position. Being too small for affluent buyers and too expensive for move-up buyers, these sellers must make tough decisions to attract buyers.

To get a better idea of the potential bargains available now for two-bedroom buyers, let’s look at some of the juiciest options in the NYC buyer’s market.

Income Restricted

First-time buyers should look out for the Housing Development Fund Corporation (HDFC) Co-ops. These kinds of properties are specifically designed to provide people with low incomes with affordable housing. A quick look at what’s available in the market shows HDFC listings at prices ranging from $250,000 to $700,000. However, the catch is that buyers have income limits (up to $57,000 for a family of two, $67,000 for three or more). There aren’t many of these HDFC properties on the market, so you may need to exercise patience.

Co-op Resale Bargains

The glut in high-end properties has had a knock-on effect in the more comparatively modest co-op resale market that has seen prices sink. This is the first time in 13 straight quarters that the median co-op price has dropped. Sellers are noticing and making substantial price cuts in a desperate bid to beat their competitors. The most significant discounts were downtown, south of 14^th Street, where the median price fell 15% to $1,568,750 compared to the same quarter last year. Midtown had the second-biggest drop, with the median price falling by 10% to $1,217,500.

Beyond Manhattan

While the market might be slow in Manhattan, it’s getting hot in the other boroughs. The Bronx, in particular, is going through a significant development boom that is seeing more market-rate properties increase for sale. Other of the five boroughs have even seen a price increase. In Queens, the median sales price rose to $600,000, a year-over-year increase of 4.6%. In Brooklyn, the median co-op sales price was $485,000. Many brokers feel that if the price is right, it will sell in the first week.

New Development Perks

Developers who are opposed to lowering their prices directly due to obligations to their lenders or fear of reducing the value of their remaining stock are looking for other ways to attract buyers. Closing cost concessions offer to pay several years of common charges, and other back-end discounts are now becoming the norm with new development purchases. It puts buyers in the medium to high-income bracket in a commanding position to negotiate for savings spread out over several years.

The Townhouse and Brownstone Market is Opening Up

The third quarter this year was tough on Townhouses. In Northern Manhattan, the median sales price fell by 34.9% to $1,826,250, according to the Douglas Elliman Report. In Brooklyn, brownstone’s median sales price was $2,240,000, an 18.5% drop from the same quarter last year. Much of this fall in sales has been attributed to the recent changes to the mansion tax. It saw an increase in the one-time fee from 1% to 4.15%, depending on the sales price. Just before it went into effect on July 1, there was a rush of buyers to close, leading to the fall in sales activity for the high-end market this quarter.

But other factors are also plaguing the high-end townhouse market that is seeing a gradual price reduction. For example, the state and local tax (SALT) deduction, which allows people in high-tax areas like New York to deduct local taxes from their federal returns, was capped at $10,000 in 2018. Previously it had no limit, and the change has meant many high-end buyers can no longer take advantage of it. In addition, the overabundance of high-end new developments over the last few years has also drawn many buyers away from townhouses. All of this has led to townhouses languishing on the market for longer, resulting in sellers now starting to make more competitive price cuts.

Luxury Buyers

For high-end buyers dreaming of owning a townhouse, now is the perfect time to start looking. But while prices have fallen, buyers must exercise caution. Ensure you have a broker with extensive experience in the townhouse market and are willing to talk with other brokers about other houses in a signed contract. There’s a lot of side-talking going on right now with townhouses listed at a specific price. Buyers must look at current sales prices and see what people are getting. Buyers also need to consider each house of interest’s pros and cons and sales data. No two townhouses are ever the same, making it difficult to find comps between them.

But, it would be best if you did a lot of research before making an offer on a townhouse. Despite the recent cooling in prices, many sellers, especially high-end ones, are prepared to wait. If you’re hoping for bottom-end prices, you won’t find it. But you can get a good deal now if you’re patient, methodical, and a little aggressive in your bidding.

Buying Tip: Make the Most of the Winter Holidays

Spring tends to be the busiest time of the year for sales, but buyers can gain an edge if they can enter the market during winter. While this will mean less inventory to choose from, it will also mean fewer buyers to compete with. Any seller that’s listing in winter is probably desperate to close soon. Usually, because they need to purchase something else, they have to relocate or urgent. Look for properties with a high number of days-on-the-market (DOM), and try to see if your broker can figure out why they’re selling right now. If they’re on a time constraint, be more open to negotiations if you can promise them a quick closing.

Final Thoughts

Whether or not now is a good time to buy depends on your circumstances. Beyond the obvious financial considerations, you must be sure you’re ready to settle down. Becoming a homeowner comes with a new level of responsibility, and you must be sure you’re prepared for that. The fact that it’s a buyer’s market makes it more critical; to stay informed and be prepared to act if you see an opportunity. Suppose you feel confident that now is the right time to buy or learn more about the current buyer’s market and schedule a meeting today with an Elika agent.