5 factors influencing New York City’s real estate market

Photo by Frank Köhntopp on Unsplash

If you look at the overall national trends, the housing market is doing exceptionally well. We’ve pulled out of the slump from the economic recession of 2008, and home prices are steadily inching higher.

But this rate isn’t consistent everywhere in the country; some areas are still straggling far behind, while others are displaying even stranger trends.

It should be no surprise that the areas most likely to deviate from the national averages are densely populated urban areas with tightly packed populations, a faster rate of change, and of course, more volatile demand.

So how is New York City, the biggest city in the United States, faring?

The New York real estate market

Overall, New York’s real estate market is being influenced by three major trends:

Driving factors

So what’s behind these major trends? There are dozens of factors at play here, but these are some of the most important to note:

Aging populations

Part of the problem in New York is the same issue the entire country is facing: baby boomers.

The high-volume, aging members of the baby boomer generation are reluctant to sell their homes, creating limited inventory, which pushes home prices up even higher.

Historically, older populations would sell their homes after their children moved out or after retiring, but this is happening less and less, resulting in a decline in home turnover.

Consistent demand

Demand for homes in New York isn’t fading. The city is seeing an economic boom, attracting more job hunters, students and young talent into the metropolitan area.

Established adults are more than willing to pay, despite the skyrocketing housing prices, so there’s no counterbalance to the reduced inventory.

Renter demand decreases

The millennial generation has historically preferred renting to owning, but the tide may be beginning to shift.

With mortgages readily available to most consumers and a clear path for millennials to build good credit and afford housing, demand for rental units is decreasing, pushing rent prices lower.

Fast consumption

When new homes hit the market, they tend to disappear fast, and this has a few different effects.

First, buyers are willing to pay more to secure a home they really want. Second, it artificially keeps inventory at all-time lows. It also creates a kind of hunger for property in the area due to its own popularity.

Low rates

Finally, though it’s a national-scale effect, interest rates are still near all-time lows. Banks are more than willing to lend money to anyone with a decent credit score who can afford the payments on the housing they want.

This is pushing more people to buy property in New York and away from renting.

What comes next?

It’s hard to say where the New York market will go from here. It’s unlikely that there will be a surge in development, and inventory will likely remain low.

Accordingly, it’s possible for prices to increase even further — in fact, some experts have opined that the housing market in NYC is still undervalued.

Still, the imbalance between purchase and renting prices and the stagnation of the market can’t last forever. It’s likely we’ll see a shakeup in the next few years, if not sooner.

Anna Johansson is a freelance writer, researcher and business consultant specializing in entrepreneurship, technology and social media trends. Follow her on Twitter and LinkedIn.