A New Year means new trends and predictions for the housing market. We always like to share some of our expectations for the year ahead in New York City real estate to kick off the new year. Looking back on the last year, decade for that fact, we saw the following: the market ended 2019 much stronger than it started the decade. The start of the decade was shortly after the Financial Crisis which rattled luxury housing markets such as New York City. 2019 was characterized by low transaction volume for most of the year, with a renewed sense of life observed as we closed the year. Prices were 15% higher at the lowest point of 2019 than they were a decade ago. Additionally, the Buyer’s Market fully took hold in 2019 in Manhattan, and interest rates continued to descend. 2019 did bring various legislative changes that hit the Luxury market hard including the Federal Tax changes as well as the passage of the Progressive Mansion Tax in New York.
What do we expect for 2020? We expect a continuation of some themes; however, it will be particularly important to follow the market closely in 2020 given it is an election year. It is important to understand how global economic and political events can impact Luxury markets to a greater magnitude than the national average. Housing markets in global hubs are largely tied to global economic growth.
Buyer’s Market:
Given inventory levels and interest rates, we expect the Buyer’s Market to continue throughout 2020. It is important to caveat that, while low rates have spurred some Buyer activity in 2019, there may be an element of caution back in the mix as certain Buyers wait to see how the Election pans out. Savvy Buyers will continue to take the opportunity to enter the Manhattan Luxury Market at a favorable price point.
Mortgage Rates:
Rates are about 1% lower at the end of 2019 than 2018. The decline in rates observed in 2019 spurred a flurry of refinancing activity as well as purchase activity. Buyers that had been on the sidelines were finally motivated to pull the trigger given just how low rates dipped in 2019. We expect that rates will likely remain in a similar range to 2019, so Buyers should continue to be motivated to make a purchase by locking in a rate. Eyes will continue to be on the Federal Reserve throughout 2020 as it relates to rates, but uncertainty over the Trade War’s impact on the Economy may keep the Fed on the sidelines for some of the year.
Pricing:
Prices are likely to remain flat or decline slightly, especially on the high end of the market where asking prices have been lofty since 2014 and demand has not kept up with a glut of luxury new development inventory that came to market. – we have been seeing this in New York as price reductions have been instrumental to deals closing since 2018. Additionally, pricing will likely continue to adjust to the new tax changes that went into effect in 2019. This holds especially true in the $5M+ segment.
Inventory:
We expect Supply to remain overall elevated, however, we do expect some degree of tightening compared to previous years. The New Development pipeline has slowed a bit, and concessions have reduced on rentals with increases in rent prices observed in 2019. New Developments with a large number of units on the market in their projects will likely continue to offer concessions if they are needing to release inventory.
Political/Global Outlook:
Political and Global events will impact New York real estate in 2020. Events both locally and on a macro level will trickle into the market. Significant legislative changes in 2019 including changes in SALT deductions, rent laws, mansion taxes, and transfer taxes will continue to impact market dynamics. On a macro level, the Trade War with China will continue to be top of mind as well as the 2020 Election.