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Talk about a possible recession has been swirling for months, and the market has taken a hit in anticipation. While no one has a crystal ball, the consensus is that we are probably due for a recession, but it is unlikely to be as catastrophic as 2008-09. While no one can say exactly when the recession will hit (many speculate it will be around election time), the NYC housing market has been trending downward due to tax law changes that have limited certain homeowner deductions as well as hesitation on the part of buyers who are waiting for the “bottom.” Our clients across the real estate spectrum have been asking our advice on how to weather (or capitalize) on these economic conditions:
Sellers need to understand that pricing is key. Accurate and strategic pricing is important no matter the economic climate, but with current conditions the margin for error is razor-thin. Traffic is down overall, and only properties perceived as “deals” or having good value are having any traction. Another piece of advice we’ve been telling our clients is to be patient. Even very hot properties that would typically be snatched up in a week or two are taking longer than anticipated, and with fewer offers. For less hot properties, the time to contract is even more protracted. In some cases, properties that languish on market end up selling for prices that are way below initial asking, while others do sell at the expected prices, but after months on the market instead of weeks.
Buyers, it is your time to shine! Interest rates are at all-time lows and prices are about 10-13% lower than in previous years (and more for condos over $3M). That said, we are seeing some herd mentality on the part of many buyers who are sitting on the sidelines rather than capitalizing on these opportunities. While no one can predict when the “bottom” will come, even if things get a bit worse before they get better, pricing has already largely adjusted in anticipation of the recession and other factors, and there are risks (like rates or lending standards or increased competition) for buyers who wait to see if prices will drop a few extra percentage points. Remember, you only know you hit the bottom when things turn back up.
Renters are facing tough times as rental prices hit an all time high last quarter in all boroughs. For renters who have the means to consider buying, there are deals out there and opportunities to lower your monthly costs through purchasing. For some renters, there may be unique residences available to rent for a couple years as owners are delaying selling, but otherwise, it is mostly good news for landlords.
For everyone in NYC, it’s important to keep in mind that the market here is resilient -- even in the middle of the last recession, prices in NYC remained fairly strong when prices nationally plummeted and foreclosures ruled the day. From Q4 2008 to Q4 2009, the median condo sale price fell 11.7%, but co-ops only fell 6.7%, and both began to correct fairly quickly in 2010 and soon exceeded pre-recession levels. If you have any questions about how to navigate the current market, please don’t hesitate to reach out.