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The NYU Furman Center has put together a comprehensive study that provides data and analysis regarding New York City’s housing, land use, demographics, and quality of life for each borough, and breaks it down further into individual neighborhoods. The State of New York City’s Housing and Neighborhoods in 2013 contains a lot of useful information. However, we will concentrate on the section that provides an analysis of the city’s housing and neighborhoods, which we feel is most relevant to our readership.
There is good news for existing homeowners, although new entrants seeking first time ownership should be prepared to pay more than a couple of years ago since the market has strengthened. In 2013, values increased a strong 9.3% from the prior year. In fact, prices were higher in every borough, for the second year in a row. Nonetheless, those looking for a home may be pleasantly surprised that their monthly income will not be as stretched compared to the top of the housing bubble in 2007.
Image via Flickr by Jeffrey Zeldman
Breaking down the price increases by borough, Brooklyn continued to see a resurgence, leading the city with a 12.2% gain. Manhattan also had a double-digit increase, with prices rising 11.1%. This is impressive given the already high prices for the borough’s properties. In fact, Manhattan has the distinct honor of being the only one where prices have risen higher than its pre-recession peak. This shows a remarkable turnaround from the dark days. Rounding it out, Queens, Staten Island, and the Bronx had 10.1%, 4.6% and 4.1% increases, respectively.
Consistent with a stronger housing market, the number of homes also increased. This indicates supply is returning to the market, and the price increases do not merely reflect strong demand on a select number of quality properties.
Last year, over 37,000 properties were sold, almost a 4,000 increase than in 2012. Each borough saw its total rise. Although the report stated it is less than the height of the pre-recession boom, it is not a completely fair comparison. Those years were marked by very lax lending standards that were unhealthy for the market in the long-term.
Turning to the lending market, mortgages originated for home purchases remained low in 2012, although we note there is no updated figure for last year. It is well-below the peak of 2005 and 2006. This is tracking the national trend, indicating stricter underwriting standards, which is beneficial to the market in the long-run since there should be fewer distressed sales in the future.
The number of mortgage refinancing in the city increased by 26% from 2011 to 2012, with the bulk accounted for in Manhattan. This is further evidence of the borough’s strong market, as well as an indication that lending standards are not too stringent. This is where housing values have increased the most, allowing homeowners to take advantage of lower interest rates.
Interestingly, affordability of home has increased substantially, despite the nice price increases over the past couple of years. This is determined by income, sales price, and interest rates. The latter has fallen substantially, and hover at around 4% compared to about 6%, according to various sources, including Zillow and Bankrate.com. Prices are lower than the pre-recession peak, despite recent rises, although that is not the case in Manhattan.
Those seeking a bargain basement foreclosed property may be disappointed. One must dig deeper beyond certain numbers that appear to indicate foreclosures are on the rise. Filings rose 31% last year, to almost 16,000, on top of an increase the prior year. However, there are a couple of important caveats. First, the activity was concentrated in Brooklyn and Queens, particularly the central and eastern portions of the former, and the southern area of the latter. Those seeking a residence or investment property will need to do more diligence on the individual neighborhoods. Second, many are repeat filings. This may seem confusing and counterintuitive, but it has more to do with the state’s legal process. It is one of the longest in the country, and often the notice a lender must file has to be done again since it is only valid for three years. Initial filings, after falling substantially in 2011 followed by another decline in 2012, did tick up last year.
However, pre-foreclosure notices, which are required to be sent to delinquent borrowers at least 90 days before a foreclosure action can be taken, fell 10% last year.
The rental market is very large in the city, accounting for about two-thirds of all households. Rents have been rising, which comes as no surprise to any that has gone hunting for an apartment.
Rents in Manhattan were the highest, at $1,474, and growing the fastest, up 19% since 2005. Brooklyn had a 12% increase. It should be noted these are real increases, or adjusted to remove the impact of inflation. Still, new renters may face a steeper increase since there is a tendency to raise it more on new tenants, as well as limitations on existing tenants if the building was rent controlled.
Renters will also find less money left over for other expenditures. The percent of income going towards rent has increased. The median rent has risen by almost 11% since 2005, while median income has increased just 2%.
This means lower and even middle income renters may be squeezed out of the city. Low income tenants are much harder hit by increased rents. This has resulted in the number of rental units affordable at those making 80% of the area’s median income dropping. Although there has been increased construction, resulting in a 5.8% increase in rental stock from 2002 to 2012, or 120,000, the bulk was aimed at the luxury market.
The report has a lot of valuable information, including statistics on quality of life measures. Crime has been lowered substantially, reaching historically low levels. Meanwhile, the incarceration has fallen between 2000 and 2012. On the education and health front, the city has also shown progress, with high school graduation rates up, and measures such as infant mortality are down. New York may be an expensive place to live, but quality of life may explain why it is so desirable.