It's all relevant to the point, I promise.
2024 is off to a blazing start due to rumblings of lower interest rates on the horizon, as well as other optimistic observations.
Here are a few insights to help you navigate the year ahead in NYC real estate.
Stock portfolios plumped up at the end of 2023, increasing confidence and loosening the purse straps of many skittish buyers. More than two-thirds of Manhattan sales in the fourth quarter of 2023 were all cash. But the REAL rush hasn't happened yet, and will likely occur closer to Spring. Don't be surprised to see some rotund deals later this year.
As interest rates decline, we expect to hear from sellers who were previously shackled by their glorious low fixed-rate mortgage and therefore disinclined to move. Then, buyers who were on the sidelines will come alive as they see both more choices and lower monthly payments. We anticipate that prices will increase accordingly in many segments this year, and many savvy buyers are getting ahead of the game, with plans to refinance in the next year or two.
We are already seeing a statistical increase in parents buying apartments in cash for their children, as well as international buyers, perhaps prompted by geopolitical uncertainties to make a secure stateside investment - making moves before the market ticks up.
Both categories will continue to present strong competition for local and/or first time buyers. However (spoiler alert) they cannot always purchase co-ops, which can help to level the playing field.
Many parents hailing from this generation are continuing to move on from their current spaces as the years go by, bringing to the market larger homes, often in need of renovation having had the same owners for many decades. The market will see more and more estates for sale (we currently have two buyers in contract on estates, and another estate listing coming soon).
The chart below indicates that NYC currently has the lowest supply of inventory for sale since late 2016 and early 2017. This is a tricky stat though. While it remains a buyer's market in the city, sellers are not facing the kind of competition that compels them to make meaningful price reductions. This has been frustrating both to cash buyers as well as those who are already dealing with higher interest rates. Stalemate.
As of January 1st, REBNY changed its co-brokerage agreement to "DE-COUPLE" buyer and seller commissions. Previously, SELLERS paid a broker commission, that was then split between the buyer's agent and seller's agent at closing. The new law provides for sellers to decide whether to only pay their broker, or to also offer compensation to the buyer's agent as well - and how much.
While it may seem counterintuitive for the seller to have been paying the broker representing the other side, there is a strategic reason that it has always been structured this way. When a commission is paid by the seller, that expense becomes a part of the "cost basis" for their home, and is deductible from their captial gains taxes. No such tax benefit for the buyer who may have been saving for years to accumulate the necessary down payment, where an additional cash requirement that cannot be financed could price them out of contention for that particular home. A slightly higher purchase price that incorporates these expenses with 80% financing is a much lighter burden to bear - and they will one day be sellers too.
It remains to be seen how many NYC listings will actually decide to change their commission structure. Many sellers will continue to offer the same compensation as before, to avoid disincentivizing buyers' agents who don't want the headache. In a buyers market, as we are, sellers will want their listing to garner as much attention as possible.
For buyers and sellers with established professional real estate relationships, this rule change means little more than some extra paperwork.
Whichever side of the transaction you are on, prepare for an exciting year ahead, we will be keeping you updated along the way as always.
Until next time,
Call Carlin today to schedule a private showingContact