Condo Vs Co Op

We have long touted New York City’s virtues, from the incredibly low crime rate to go along with the economic opportunity, museums, restaurants, and world-class events. Add in a public transportation system that runs 24/7. People continue flocking to New York, and the population grew to over 8.5 million as of July 2016, from about 8.2 million in 2010, according to a U.S. Census Bureau estimate.

The opportunities and ensuing population growth, which have been ongoing for some time, help explain why the city has favorable characteristics for real estate investors.

A resilient market

New York City prices have shown a remarkable ability to bounce back from the rough times a decade ago. In 2007, the average residential sale was about $731,500 ($42.7 billion total consideration, 58,393 transactions), based on data provided by the Real Estate Board of New York (REBNY). Residential sales are defined as one-to-three-family dwellings, condos, and co-ops. Two years later, at the low point in the cycle, this fell to an average $660,700, as both the consideration and number of units plummeted by 45% and 39%, respectively. Last year, after several years of steady improvements, the average climbed to nearly $959,000.

The first half of 2017 continued to be strong. The average sales price grew 3% year-over-year to $1.05 million in the second quarter. Meanwhile, the median price, which removes the effect of extreme prices, rose 8% to $630,000. Unit volume increased, too, 15% higher than a year ago.

Manhattan’s average condo price nearly doubled to over $3 million in the first quarter of 2017 compared to the first quarter of 2007. Co-op prices were more muted, with the average price rising to $1.18 million from $1.13 million. However, the average co-op price is skewed by the extreme prices at the high-end of the market.

The condo’s blended (studios to 4 bedrooms) average price per square rose nearly 41% to $1,724 compared to 2007’s level. For Manhattan co-ops, the blended average price per square foot was about 26% higher, reaching $1,263.
The first half of 2017 continued to be strong. The average sales price grew 3% year-over-year to $1.05 million in the second quarter. Meanwhile, the median price, which removes the effect of extreme prices, rose 8% to $630,000. Unit volume increased, too, 15% higher than a year ago.

Rentals

Rental income is an important and stable revenue source for investors. There is good news on this front, too. Through the summer, rents in Manhattan, Brooklyn, and Queens continued to push upward and reached record highs. Brooklyn and Queens experienced about a 1% increase, to about $2m500 and $2,000 and   $2,500. Manhattan has been relatively stable but commands about $3,000 a month. There are also reports that landlords are offering fewer discounts and other concessions amid fewer vacancies.

A good climate

Demographics are favorable for New York City investors. Unemployment is low, at 5.1%, and the average weekly wage (thought the first quarter) was nearly $3,000, nearly triple the average for the entire country. It is tops in the country and grew about 7% from the prior year.

The city also attracts foreign buyers, widening the buyer pool. This helps support prices, particularly in a weaker economic climate. For instance, New York’s economy may be sluggish, but China’s may be doing very well. Chinese buyers may take the opportunity to purchase NYC real estate. New York’s regulations make it relatively easy for foreigners to purchase real estate, particularly compared to other world cities.

Final thoughts

While a recession can cause economic pain, the city has enough favorable characteristics to blunt the impact. During the last recession, which was severe, the market rebounded relatively quickly and resoundingly.

Before jumping in with both feet, though, remember the city is referred to as the “concrete jungle.” It is imperative to seek professionals to be your jungle guide.

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