Recent economic reports show the national housing market is slowing down. The Commerce Department reported that January’s new home sales fell 6.9% to a seasonally adjusted annual rate (SAAR) of 607,000. Meanwhile, the median price fell by 3.8% to $317,200. The National Association of Realtors (NAR) noted that existing home sales dropped 1.2% in January. This brought the SAAR level down to 4.94 million, which was an 8.5% decrease from a year ago. This is the third consecutive quarterly decline.
However, buyers should note that the national market is not necessarily reflective of New York City’s conditions. The NAR report stated that sales in the Northeast rose 2.9%, although it decreased 1.4% versus a year ago.
The national housing market is significant, particularly to the overall economy. However, it is crucial for buyers to realize that the New York City and national markets are different. They do not always move in lock-step with each other.
In the last economic downturn, New York City’s real estate market did not follow the national trend. The decline was not as steep, nor did it last as long. The S&P Case Shiller NY index reached 216.6 in May 2006. Over the next three years, the index fell to around 172, most of the downward movement. It rose over 205 in December 2018.
The S&P Case Shiller National Home Price Index went from a peak of over 184 in mid-2006 to a post-recession low of 134 in February 2012. Since then, then the national housing price index rose sharply to over 205 at the end of last year.
New York City is unique for several reasons. The area is a world city with several major industries, such as financial services, advertising, and technology. This contrasts with other cities that are overly reliant on one industry. Several years ago, the city’s housing market received a boost from foreign buyers, including from China and Russia, for many reasons. However, this slowed down a few years ago. There are other reasons that New York City’s market became more favorable towards buyers. While the slumping luxury market was initially impacted, the upshot is that there was more housing inventory in the $5 million-plus market, particularly the Midtown area.
Where we are now
New York’s market softened further in the fourth quarter. The city’s median price and unit sales both fell, according to the Real Estate Board on New York (REBNY). However, there are signs that the primary home buyer’s market below $3 million is potentially bottoming out. New York City’s real estate market began its correction before most of the country. Its recovery could also lead the way.
While the national market is showing signs of slowing down, we see potential positive indications regarding New York City. We have our eyes and ears on the market at Elika Real Estate. Therefore, we see any further price drops on desirable properties, amounting to more closings. We are also noticing that properties are spending less time on the market as we approach the spring/summer sales season with interest rates remaining low.
What you can do
Understanding the market dynamics helps you set a realistic budget, and submitting an offer that reflects the current market is crucial. The key is to understand the local housing dynamic and adjust accordingly. You do yourself a disservice by merely using lagging comps data. Otherwise, you will find yourself mismatched with the seller’s expectation. This could result in losing out on a great place.
Heading into the spring/summer season with continued low-interest rates, you should prepare yourself for more competition on desirable properties. Less desirable properties and neighborhoods should continue to experience weakness.