Meet your real estate goals this year.
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2024 NYC real estate forecast: Buyers and sellers emerge, renters gain leverage
Deals in New York City’s sales market plunged in 2023, a result of uncomfortably high mortgage rates that turned off buyers and sellers alike. Even buyers who didn’t need financing were left high and dry because of very low inventory. The problem, in a nutshell: Sellers were sitting on mortgage rates as low as 3 percent and were reluctant to buy if it meant paying 7 or even 8 percent.
Mortgage rates have edged down in the last few weeks—in December the
30-year fixed mortgage rate fell below 7 percent for the first time since August just as the Federal Reserve signaled that it expects to make three interest rate cuts this year, which will lower the cost of borrowing further.
Those cuts are expected to bring buyers back into the sales market this year and get the gears moving again in both the sales and rental markets.
The Fed’s plan “will take some of the pressure off the rental market by encouraging renters to buy,” says Jonathan Miller, president and CEO of appraisal firm
Miller Samuel. As a result, he says, “NYC rents will come down, but not dramatically.
“If 2023 was the year of disappointment, 2024 will be the year of incremental change. It’s not a snappy catchphrase,” Miller acknowledges. But most will probably take it.
Ready to get started? Our 2024 forecast is designed so you can skip ahead to the section most relevant to you via the links below. However, because each segment of the NYC real estate market is interconnected, we recommend reading through the entire article when you have the time.
Whether you plan on buying, selling, or renting a new place, here’s what you need to know to achieve your real estate goals this year.
What to expect if you’re a renter: A little more leverage with landlords
If you’re hunting for a new apartment in the early part of the year, you’re likely to catch a break. You’ll find you have more options to consider thanks to an increase in listings. That’s a big deal for NYC renters, not just because you have a better shot at getting the location, layout, and amenities you want (or at least some of what you want), but because additional listings put pressure on rents.
As inventory rises in 2024, you can expect rents for new leases to stop climbing, says Kenny Lee, economist for
StreetEasy. But don’t expect a sharp drop, because inventory levels are still below pre-pandemic levels.
A rent drop in Manhattan
Renters will find some relief in an unexpected place: Manhattan. Asking rents will likely fall as landlords face the most competition to attract tenants. Why are there more listings here than other parts of the city? One explanation: In the past year, soaring rents encouraged more owners to become landlords, resulting in a 15.9 percent year-over-year increase in the borough’s inventory in 2023, according to StreetEasy.
But at the same time, landlords have been aggressive about encouraging tenants to renew their leases, and with the seasonal winter slowdown upon us, inventory has piled up.
Some new listings are a result of
Local Law 18, the Short-Term Rental Registration Law aimed at eliminating illegal rentals. The rules require owners to register their place with the city; in return they are given a
registration number that must be displayed on listings. Owners and listing sites that are not in compliance can face steep fines.
“Many of these units were bought by non-institutional investors who are now faced with the option of either converting to a standard lease with a lower return or selling. As the sales market is not exactly on fire right now, seeking new, longer-term tenants seems like the easy choice.” says John Walkup, co-founder of
UrbanDigs, a real estate data analytics company.
It’s not clear how much NYC's rental inventory will grow due to these changes or whether this trend will continue, he adds.
The ascent for NYC rents started sputtering in the fall and then showed a surprising decline for Manhattan in November.
According to the
Elliman Report, Manhattan’s median rent in November slipped month over month, dropping 4.6 percent to $4,000, Miller, who is the author of the report, previously told Brick. November’s median rent is 9.1 percent lower than the August peak of $4,400
“Manhattan’s median rent is falling faster than anticipated,” Miller says.
But the downward slide doesn’t match the pace of
rocket ship-like rent increases last year, a result in part of the Federal Reserve’s rate hikes, which tipped many would-be NYC buyers into the already tight rental market.
Prepare to negotiate
As Allia Mohamed, CEO of rental platform
openigloo, explains it, seasonality is returning to the NYC rental market, and that means the return of the typical winter slowdown and a willingness on behalf of landlords to make deals.
“We’re also seeing more concessions from landlords, such as one month free, especially at new developments, and no-fee apartments, where the landlord pays the fee,” she says. New listings are being advertised with concessions and even if they don’t, Mohamed says renters should be aware you have some ability to negotiate—which hasn’t been the case for apartment seekers in the past two years.
Pay attention to how long an apartment has been on the market—if it has sat for more than 30 days you have a better shot at asking for a free month, amenity fee waiver, or even a rent decrease. But renters should “use their judgment,” she warns. If your goal is to stay long term, you need to prepare for a rent increase when it is time to renew your lease.
That’s a big deal because any rent discount goes away at lease renewal time, and the increase is based on top of the
gross (not net) rent. One way you can look ahead is with openigloo’s
Listings from the Future. For example, if you know you need to move in four or six months the site can show you listings expected to hit the market then.
Where and when to catch a deal
Renters likely have until the end of March to catch a deal, says Adjina Dekidjiev, a broker at
Coldwell Banker Warburg.
Rents “typically decrease during the winter months, especially for apartments in less desirable neighborhoods. The pattern will likely continue until the start of the busy season in April. Apartments farther from transportation and without outstanding features/amenities will take longer to rent unless they're priced well,” she says.
She says concessions are typically a feature of the slow season, but they depend on several factors, including the location, amenities, and apartment size.
“There are more one bedrooms and studios available than two bedrooms and three bedrooms currently, so owners will likely continue to offer concessions for these,” Dekidjiev says.
Temper your expectations
Becki Danchik, a broker at
Coldwell Banker Warburg, says owners of luxury rentals will need to lower rents because they are having trouble filling vacant apartments.
While renters will have more listings to choose from, they’re not all great places.
“Renters seem to be more selective because there is more inventory to choose from. I have heard concerns and complaints from renters that while there are properties to see, those properties do not live up to their expectations. So I think both sides need to adjust their expectations,” she says.
Should you stay or should you go?
Brian Hourigan, managing director at
BOND New York, expects to see an uptick of
leasebreaks in the new year. Tenants will have to make a calculation to see it is worth the cost of moving and any leasebreak penalty to save money over the longer term, he says.
Some renters may get better deals if they opt to sign a new lease somewhere else. In the next quarter, landlords will likely push market-rate tenants to sign longer leases of 16-18 months, he says.
“Tenants will benefit from longer-term leases with the predictability and stability of pricing which comes with that, even though they might be asked to pay a bit more when their lease comes up for renewal,” he says.
What to expect if you’re a buyer: More listings surface as mortgage rates slip
If you’ve been waiting to buy in NYC, 2024 appears to be the year to make your move—certainly better than 2023 (despite what
we said last year. Oops!)
There’s one very important change that nobody saw coming: Starting this year, buyers may (emphasis on may) find themselves on the
hook for broker’s fees.
That’s because if you work with a buyer’s broker who is a member of the Real Estate Board of New York, broker fees are no longer something you can assume are the seller’s responsibility. REBNY announced in October it was changing its universal co-brokerage agreement to
“decouple” commissions; the change went into effect January 1st. It's an effort to get out in front of the
many anti-trust suits cropping up across the U.S. and here in NYC.
What does it mean if you’re buying in 2024? Well here's how it is supposed to play out: A seller will negotiate a fee with their broker and make a separate offer to your broker in writing. Your broker can then accept, reject, or negotiate the offer. If the seller doesn’t offer a fee to your broker, or doesn’t offer enough, under REBNY’s new rules your broker may negotiate their fee with you, which means budgeting an extra 1 to 3 percent of the purchase price.
Don’t be surprised if your broker wants you to sign something to clarify the terms of working together.
As Phil Horigan, founder of
The Leasebreak Team, explains, “Generally in NYC only listing agents have needed to worry about getting their client to sign anything before agreeing to work together. I think buyer agents are going to have to start being trained on getting their buyers to sign and negotiate buyer agreements,” he says.
Be prepared for a broker to make a case for why their services are worth paying for, says Douglas Wagner, manager of brokerage services,
BOND New York.
“It will be a priority for agents to be able to define their value on both sides of a transaction, and buyer agents especially will demonstrate the tremendous amount of preparation and labor that goes into conducting a single deal or an ongoing professional practice,” Wagner says.
Interest rate cuts lower borrowing costs
If you were hoping to buy in NYC last year, you were likely stymied by a lack of inventory. Listings dropped 15 percent in 2023 compared to 2022, according to Kenny Lee, economist at StreetEasy.
What gummed things up: Sellers who were sitting on mortgages with rates in the 3 percent range were reluctant to sell and buy somewhere else if that meant they would have to get a mortgage at nearly 8 percent.
But that scenario has already shifted. In December, mortgage rates were
approaching 7 percent when the
Federal Reserve officials wrapped up their last meeting for 2023, leaving interest rates untouched. They forecast that they will cut borrowing costs three times in 2024.
The Fed
raised rates 11 times during 2022 and 2023 to tamp down inflation but has held rates at 5.25-5.50 percent since July.
“There are signs that the cumulative rate hikes are doing their job and working to bring the rate of inflation down to its goal rate,” says Melissa Cohn, the regional vice president of
William Raveis Mortgage. “High interest rates are impacting the economy and hopefully will bring inflation back to 2 percent [this] year,” she says.
Cohn says she thinks now is a good time for potential buyers to “start making a move,” given that mortgage rates have fallen in recent weeks, and that low demand during the holiday season may soften sellers’ resolve a bit. Because the Fed didn’t reveal the timing of this year’s interest rate cuts, buyers may want to act now rather than wait for a friendlier economic environment that may not materialize.
“We’re probably at an inflection point where rates have come down enough that more buyers are coming back into the marketplace, and prices have certainly not gone up,” Cohn says.
Prices will eventually increase
After falling for four consecutive quarters, median prices for Manhattan co-op and condos appeared to
stabilize in the third quarter, according to the
Elliman Report. (Fourth quarter sales data was unavailable at publication time.)
But eventually there could be a swing in the other direction this year as more buyers and sellers pile into the market.
As mortgage rates fall, more sellers will be inspired to sell their properties, says Brian K. Lewis, a broker at
Compass. That means buyers should have more options, he says, predicting that prices will eventually rise—“but not dramatically”—with more listings.
“Many would-be sellers are stuck in their current homes, married to their incredibly low interest rates. As mortgage interest rates come down, more sellers will enter the marketplace, finally ready to move on with their lives, and get to their next home. This means more choices for buyers in a market already starved for inventory,” Lewis says.