The Predictions of the New York Real Estate Market 2021

“Is it a good time to invest in property and buy a house?” With the current market condition, this is the question that every New Yorker is asking themselves.  The real estate market was hit pretty badly in 2020, and many businesses part of this industry collapsed. Although many residential areas of the US real estate market indeed continue to improve, one wonders that what is the state of the New York real estate market and what should be expected in 2021?

The latest records show that unemployment reached up to 9.6% in New York. As a result, many individuals were not able to pay their rent, which not only left many vacant apartments in the city, but the lowest rents in more than a decade were recorded. The median asking rents in New York dropped to $2,880.  Landlords will likely be forced to lower rents in the future to attract tenants to New York rental properties in 2021. This may not be a permanent trend for the New York real estate market, but it’s likely to occur in 2021 before the economy fully recovers. Hence, it is predicted that the road to recovery in 2021 would be slow, which would reduce the rents even further.

Now let’s talk about the suburbs! The fallout from the pandemic led to people shifting to the suburbs as now companies are asking their employees to work remotely.  Reports show that there was a 44% increase in home sales in the suburbs. This shift bought up house prices in those areas. It is expected that this migration trend will continue in the New York real estate market in 2021.

On the other hand, those who remained in the city were able to find a better home for a lesser price as cost prices of housing reduced. Manhattan home prices took a dip and continue to decrease, while the market condition of Brooklyn is completely different. The competitive real estate market in the area continues to push real estate prices higher. Moreover, by studying the current market trends, it is predicted that sales prices will increase by 26.65% in the next ten years.

Let’s move on to the last aspect of the real estate industry! Is New York a buyer’s market or a seller’s market? The buyers have already made a swift comeback since the lockdown was lifted in 2020. For sellers in New York, it is a great time to sell their property as motivated buyers are looking for houses to buy.

All in all, it is predicted that the real estate market would bounce back in 2021 once the pandemic ends!

Expensive Neighborhoods of the Big Apple

There is no doubt in the fact that New York is one of the most expensive cities to live in. From high rents to skyrocket prices of real estate properties, the most extravagant and luxury neighborhoods can be found in the Big Apple! It is estimated that the average per square feet price can reach up to $1,371 per square foot, and this is just the standard cost! The total asking prices are much higher. So, let’s explore and determine that which is the most expensive neighborhood of NYC!

  • The Upper East Side

Those who have watched the television series Gossip Girl are very well in this area! The average property price can reach up to$322,432.  This neighborhood has a lot to offer to its residents — lively restaurants, great ambiance, shaded streets — these attributes make this one that tops the list. The elevated parks in this end have transformed the neighborhood into a New York City hotspot. Real estate has boomed all along the park’s route, and prices continue to rise. Thus, the Upper East Side is No. 1 should come as no surprise, given the concentration of wealth which the tenants hold.

  • Soho

The neighborhood with the highest percentage of residents with a household income of $200,000 or higher are allocated in this area. The average home rent costs $258,531. Soho is known for its fancy shops and cozy coffee shops. Furthermore, the real estate property has a high demand as the warehouse-converted loft apartments have attracted celebrities such as Tyra Banks, Jonah Hill, and Kelly Ripa.

  • Midtown/ Turtle Bay

One of the richest neighborhoods with the mean rent price reaching $220,079. This area of Manhattan is very well known for its office towers and high-end buildings. Midtown is shaping up to be one of the top luxury neighborhoods in New York. That’s because this area has become a financial hub, housing tall condo towers that are filled with apartments that have record-setting price tags. Moreover, it appeals as a residential neighborhood because some of the phenomenal parts of the city like Central Park and 5th Avenue shopping are just within a five minutes’ walk.

  • West Village

West Village has made it to the top 5 as the per month rent of this area can reach $207,649. The neighborhood continues to be one of New York’s most beloved and well-known areas as celebrities like Robert De Niro and Sarah Jessica Parker have homes here.

  • Chelsea

There was a time when Chelsea was an industrial hub however, recently, this neighborhood was transformed into a residential area, offering luxury and high-end housing.  Popular restaurants like Txikito and Toro attract several celebrities in the area. Similarly, the area is known as the center and birthplace for various art cultures.

The Resurgence of New York’s Real Estate Market

New York’s Real Estate is slowly recovering and making its way back to the top after a grim year. Due to the global pandemic, the early months of 2020 saw a sharp decline in the sales of real estate properties as people started fleeing to suburban to protect themselves from the virus. But buyers came back in the final months of 2020, showing a gradual improvement in the sales of properties. However, the sales in Manhattan were still down by 30 percent compared to 2019.

Manhattan’s sales graph has shown no sign of improvement even though there have been recent signs of improvement, according to new industry statistics. There were 7,048 sales of co-ops and condos in Manhattan in 2020, compared with 10,048 in 2019, representing a nearly 30 percent drop, according to the brokerage Douglas Elliman. Co-op and condo sales were down about equally. “There has been an upward grind in slow motion that’s been occurring since last spring,” said Jonathan Miller, an appraiser and the author of a year-end report for the brokerage Douglas Elliman released Tuesday. “But Manhattan has just not kept pace with the rest of the region.”

The sales in New York declined because of the ban on apartment showings at the beginning of 2020, and the nationwide lockdown further restricted people from buying apartments. Even though New York’s sales activity took a dip, the prices didn’t collapse to the same extent, with the median of $1.05 million down only slightly, by a fluctuation of four percent, since the start of the coronavirus crisis.

In a pattern that suggests a widening socio-economic divide, affluent buyers continued to buy expensive apartments, reports from several brokerages show that entry-level customers, who are more likely to be unemployed because of Covid-19, were practically absent.

During the lockdown, the buyers started demanding larger homes because of their recent interest in home offices, as many people preferred to work from home. “Prices aren’t rising,” Mr. Miller said. “There was just less activity at the bottom and more activity at the top.”

Although the sales activity declined during the early months of 2020, after a reduction in coronavirus cases and the lifting of lockdown, the market slowly began to recover. In the fourth quarter, which covers October through December, there were 1,894 deals, according to a new report from the firm Brown Harris Stevens, up from 1,556 in the previous quarter, which bucks a decline that typically happens around holiday-time in the winter.

The Collapse of New York City’s Retail Rents

New York City’s rental rates for retail space have tumbled to historic lows, dropping as much as 25% from 2019 levels, as troubled retailers like Neiman Marcus and Century 21 closed stores and vacancies soared, according to a report. The Real Estate Board of New York released an annual report stating that asking retail rents throughout Manhattan during the fall of 2020 declined in all of the 17 corridors it tracks, including areas along the Upper East Side, the West Village, and Downtown.

Recently REBNY reported that the lease signed rents are lower than asking rents as brokers are recording a 20% difference, on average, between asking rents and taking rents, it said. Although New York’s real estate market is finally paving its way to recovery, there are still eight areas that saw the lowest asking rents in at least a decade, including SoHo, the upper part of Madison Avenue, and upper Fifth Avenue. REBNY also reported that almost eleven of New York’s corridors saw an increase in the available retail space ranging from 6% to as much as 67% since 2019. However, there was no substantial increase in Manhattan’s sales volume.

“Historic declines in rent across Manhattan’s most prominent retail corridors show just how much the market has adjusted amid the unprecedented impacts of the Covid-19 crisis,” REBNY President James Whelan said.

Fifth Avenue’s retail district in New York, the home to many high-end retail shops, also saw a decline in asking rents by 8% to $2,618 per square foot. Several businesses have left the area and closed down their stores due to the current COVID-19 situation as they are earning quite low.

Along Broadway in SoHo, from Houston to Broome streets, average asking rents suffered the most prominent drop of all the corridors, falling 25% year over year, to $367 per square foot, REBNY found. That represented a 62% decline from the corridor’s peak back in the spring of 2015. As many as 32 locations were shut down in SoHo, most of them closed during the early months of the nationwide lockdown.

There are many unique neighborhoods in New York where people often come to shop, but due to the current situation, many businesses have closed down. It is being stated that the damage caused by the global pandemic is far too much to handle, and the recovery will take many years based on the investments. It is an ideal time for business growth and new opportunities to set up new businesses again.

Factors Affecting the Closing Timeline of NYC’s Co-op Apartments

A housing cooperative is also known as a “Co-op.”  A co-op is a home that is owned and controlled jointly by a group of individuals who have equal shares, membership, and occupancy rights to the housing community. The member lives with the other residents rather than sharing a single unit. A co-op is essentially a nonprofit financial corporation, complete with a board of directors, and each member is a shareholder in the community.

Generally, the co-op closing time in NYC takes around two to three months from the time you sign the contract because it requires the buyer to be approved by the board. A typical financed deal usually takes at least three months to close. Many factors affect the closing of a coop apartment purchase. One of the factors is that the co-op buyers are unaware of the fact that the time duration to close the deal is mainly dependent on the co-op board and its managing agent. Thus, submitting your application at the earliest does not guarantee a quick closing.

However, working with a seasoned buyer’s agent on your co-op purchase can increase the chances of a swift and smooth closing. Better yet, you can save thousands and reduce your closing costs by requesting a buyer agent commission rebate. Rebates in NYC are generally considered to be legal and tax-free.

Here are some of the reasons for a delayed co-op closing date:

  • The co-op board is incomplete or contains errors
  • The managing agent is not good enough or slow in completing the process
  • The co-op board only reviews applications once a month
  • The co-op board is reviewing numerous applications at a time
  • The seller or buyer are unaccommodating
  • Scheduling conflicts delay the co-op board interviewdate

The average closing time for both financed and cash deals is different.

Closing Timeline for a Financed Deal:

  • 2 to 4 Weeks: Submit Board Application
  • 4 to 6 Weeks: Application Review Period
  • 2 to 3 Weeks: Interview and Closing

Closing Timeline for a Cash Deal:

  • 1 to 2 Weeks: Submit Board Application
  • 4 to 6 Weeks: Application Review Period
  • 2 to 3 Weeks: Interview and Closing

In total, it takes 7 to 11 weeks to close a financed deal and 8 to 13 weeks to close a cash deal.

Typically, it takes two to three months to close on a sponsor co-op apartment deal in NYC because they are short and do not require to undergo the co-op board’s approval process. Once you get the co-op board approval, an interview is arranged, and after it takes a week to make the final decision. Therefore, the timeline for co-op board approval varies from building to building and can also be impacted by the time of year, specific real estate attorneys on the transaction, and personalities of the buyer and seller, among other factors.

How much does an Average New York Real Estate Agent make?

New York City is quite famous for its expensive real and residential estate areas. Being a real estate agent in one of the most expensive cities is quite beneficial. They are licensed professionals and can earn millions of dollars depending on the number of transactions and the properties sold, rented, or leased. Each day is unique and different for a real estate agent; while this can be an appealing aspect of the real estate profession, it can also offer unique challenges or opportunities, depending on the agent’s skill set. Real Estate agents and brokers in NYC can help you find your perfect home. Therefore, being a top agent in New York is as intriguing as it is lucrative.

According to the Quarterly Census of Employment and Wages published by the State of New York, New York City real estate salespersons averaged an income of $75,800 in 2015. And lately, it is estimated that an average New York real estate agent earns around $116,460 per year, making far more money than other realtors in the country.

Real estate agents work independently are their boss with their own set of timings. Getting into real estate means you do not have to be at an office or a desk from 9-5.  It also means that you do not have a set salary or hourly wage. They are also excluded from all the health benefits and vacation packages.

Real estate agents are paid in a commission at the end of every sales transaction, and it gets split between the agent, listing agent, and the broker. For example, if a $60,000 commission is obtained on a $1 million sale. The seller agrees to pay a 6% commission divided between the buyer and listing agent. This 3% or $30,000 gets again divided between the agent who facilitated the sale and the broker they work with. These broker/agent splits vary. An experienced agent can keep up to 70% of the $30,000 commission. However, most percentages are 50/50, with the agent getting 1.5% or $15,000, and their broker getting the same. Therefore, the commission whittles down to a low price.

Ryan Serhant is one of the most famous agents. And just like an ordinary agent, his first few years were difficult. His first big sale was for an $8.5 million unit in Manhattan, from which his fortune started rising. In 2012, the New York real estate publication, The Real Deal ranked Serhant #15 out of the top 100 agents in New York.

 

The Revival of Pied-À-Terre Tax in New York

In New York City real estate, a pied-à-terre is an apartment whose owner utilizes it only on weekends or for brief periods, as a vacation home or a “non-primary residence.” It is not intended to be utilized as a primary residence. Some buyers are parents who want to come travel over the weekend to meet their child or people who live in a faraway city stay who come for shopping and dining purposes stay back without having to travel.

An uproar was sparked in 2019 when Chicago hedge-fund billionaire Ken Griffin purchased a $238 million pied-à-terre penthouse on Central Park South, which drew calls for the city to enact a tax on expensive second homes. Furthermore, these secondary taxes have been an issue for many individuals and is causing everyone to freak out as the state lawmakers are currently reviewing the tax situation. The luxury market is in a state of danger as the tax would eat away most of their sales.

Democratic legislators have added “pied-à-terre tax” to their proposal, and if it is implemented, the tax will become effective by the start of next year, and it will raise the property taxes of New York’s residential homes that wouldn’t be belonging to a primary residence. “This tax is certainly a priority for the 2021 state legislative session,” said Hoylman, whose district stretches from Manhattan’s Upper West Side to Chelsea and Greenwich Village.

As proposed, the pied-à-terre tax would:

  1. Impose an annual property tax of 0.5% to 4% on one-, two-, or three-family homes with $5 million or higher of fair market value determined based on the five-year average market value (using a comparable sale-based valuation method as determined by the Department of Finance). The tax would apply to the fair market value above $5 million.
  2. Impose an annual property tax of 10% to 13.5% on residential condominium and cooperative units with assessed values of $300,000 or higher. The tax would apply to the assessed value above $300,000 as determined by the city assessor. Assessed values are typically lower than the property’s fair market value.

However, the proposed tax has some exemptions:

  • The property or dwelling unit is the primary residence of at least one owner;
  • The property is the primary residence of the parent or child of at least one owner;
  • The owner of the condominium or co-op has obtained an appraisal report certified by a state-certified real estate appraiser or authenticated by a state licensed real estate appraiser, within the prior three years, showing that the residential property or dwelling unit has an appraisal value of less than $5 million; or
  • The property is rented on a full-time basis to tenant(s) who use the property as their primary residence.

The Downfall of New York’s Suburban

The global pandemic has brought about a change in the sales of suburbs surrounding New York. Due to the COVID-19 outbreak, people started fleeing the urban areas into the suburbs to protect themselves. The sales of suburbs started rising and became a sensation in the early spring months of the pandemic, and an overused symbol of the city’s purported demise. “It was a rocket ship,” said Jonathan J. Miller, a New York appraiser who also tracks sales in parts of Long Island, Westchester, and Fairfield, Conn. “The trajectory from May to July was straight up — it was unprecedented.”

The houses in suburban are usually sitting vacant for months and years but the pandemic suddenly brought a wave of outbound low-income New Yorkers who could afford any more than any house they could buy in the city, coupled with near-record-low mortgage rates. Mr. Miller said that the median rate in the city is high-end in the suburbs, which allowed people to move as they could easily afford the houses with near record-low-income rates. It also led to bidding wars among people.

In Westchester County, the median sale price of a home last quarter rose to $680,000 from the same time last year, a 20.4 percent jump, the biggest in more than 28 years, Mr. Miller said. With prices now at their highest in at least 34 years, buyers who bought at the peak of the frenzy should not expect to break even on a resale for two to five years, he said.

New Yorkers prefer to the live-in single-family apartment rather than a house and private house still dominate the landscape in most suburbs around New York. “People are starting to realize that the age of the single-family home is starting to wane,” he said. Over six or seven years, his company has amassed about 2,000 apartments in the suburbs of Long Island, and New Rochelle, N.Y., Stamford, Conn., and other areas. Over the next three years, the company plans to complete another 2,000 units, doubling its portfolio.

Other than that, it has led people to think out of the box and expand their boundaries, where people are more open to options and willing to consider the possibility of remote work. In the next few years, the suburbs could see tremendous development in commuting, housing, and real estate. Regarding the suburbs, Mr. Maturo says, “Over the next ten years, we’re going to see tremendous development along transit lines in downtown areas. This is just the start.”

 

A Guide to New York’s Most Affordable Neighborhoods

New York is one of the most expensive places to live, and there is not technically a cheap and viable way to live in the city. To find an affordable place in the city has always been a major challenge because they are very expensive. There are ways to shave costs and compromise on space. You could either choose a co-op over a condo as they’re less expensive or buy a fixer-upper. Or you could live in a ground-floor (or even basement) apartment.

The right neighborhood for a buyer is entirely subjective, but there are certain things everyone should keep in mind during their search. How far is this place from the office, and how long and convenient will the commute be? For those moving with children, what is the quality of the area schools? Likewise, if you’re moving with a dog, are there parks or dog runs within walking distance of the building?

When we are looking for an affordable place, we also have to keep all the amenities in mind. For example, if there are any schools, parks, supermarkets, drugstores, or popular restaurants nearby. Some people like to live in the heart of New York,  like the Times Square of Wall street, whereas it could be a nuisance for other people.

Manhattan is one of the most affordable neighborhoods, and we talk about last year’s sales Manhattan’s sales increased by 5.65% from the year before. The most popular neighborhood in Manhattan is Inwood, which is also one of the most affordable spots. It is also famous for being the transit access and a fast commute to Midtown and Downtown via the A-line. The upper and lower east sides are known for their distinctive architecture and large floor plans.

Brooklyn used to be the place where people went to find affordability when they got priced off the island, and some areas, like Cobble Hill, the neighborhood with the highest median price of $1,640,000, are well into Manhattan numbers.Sheepshead bay beat out every other affordable neighborhood with the maximum number of transactions. “Sheepshead Bay is a very special neighborhood in Southern Brooklyn that is as much of a destination as a great place to live,” says Francine Albert, a broker at Citi Habitats.

In central Queens, Jackson Heights is one of New York’s most diverse, vibrant communities and is also known for its affordable apartments. It also has a good number of parks and playgrounds and a family-friendly neighborhood.

In the Bronx, Highbridge has claimed the title of the most affordable neighborhood. The area is served by the 4, B, and D trains, offering quick transportation into Manhattan, and it’s possible to get to Grand Central in under 30 minutes. During the past year, Heartland village has been one of the most active neighborhoods in Staten Island. The area is in the center of the borough and offers easy access to everything on the island.

New York’s Luxury Real Estate is Progressing Towards a Better Future

In the last quarter of 2020, New York’s luxury real estate has headed towards improvement. And judging by its progress, New York’s luxury real estate market should enter 2021 with confidence. But fear still looms large, as the virus is taking a new shape, the return of pied-à-terre tax, and the wagering economic future of the country.

Sales of homes that cost more than $4 million were a little above those of the same three months in 2019, says Donna Olshan, president of luxury real estate broker Olshan Realty. “Now, some of that has to do with demand that was never met because we lost the most important quarter, the spring,” she says. She also says that people are taking advantage of the Covid-19 discount and looking for long term prospects of buying in New York.

People are fleeing back into the city as the suburb mania is coming to an end. The suburbs prices are still rising regardless of the low activity in buying. John Walkup, CEO, and co-founder of UrbanDigs agrees and says the move to the suburbs this year was part of an older trend. “We were in year three in this shift to the suburbs picking up in demand, relative to New York City,” Walkup says.

Whereas Brooklyn has maintained its reputation as the sale of townhouses was quite impressive during the pandemic. According to Urbandigs data, the median price for luxury homes in the last quarter is expected to rise by 5.5%. As the prices continue to dip, it is attracting more buyers, and Brooklyn is certainly accelerating. But despite the nonexistent spring sales season, this year’s median luxury sales price in Brooklyn, according to UrbanDigs, was only down 1.5% compared to last year.

Due to COVID-19, foreign buyers have backed out of the international real estate market. Almost all the luxury buildings, particularly condominiums in the “Billionaires Row,” are specifically positioned for the foreign market because they add to the overall revenue.

The luxury condominium Manhattan market sales continue to rise as the prices are continuing to drop. “In 2020, we had 8.7 years of sellout, meaning it would take 8.7 years to sell all unsold Manhattan new-development condos,” Miller says. That is likely to drop to 7.2 years in 2021 because there’s an anticipated “decline of new product coming into the market,” he says.

2021 is going to bring major discounts, which would bring in plenty of serious deals. For all the buyers out there, go out and strike and deal within the next few months.