Two Losers and a Winner in NYC Real Estate
This is Corey Cohen, founder of The Roebling Group – the #1 Google-ranked real estate agency with a 10-year history, 300+ completed deals, and $400m in total deal volume.
The Roebling Report is our bi-weekly newsletter that summarizes everything you need to know about New York City real estate.
NYC’s Most Expensive Real Estate Settles to Pre-Pandemic Levels
As it turns out, even the world’s billionaires don’t like to overpay for their houses.
Over the past two years, real estate markets across the US experienced frenzied buying that was mainly fueled by record-low interest rates. But – now that mortgage rates have skyrocketed – housing valuations are starting to return to more normal levels. This is even true for New York City’s Billionaire’s Row.¹
When it was first listed, the penthouse suite overlooking Manhattan’s Central Park was listed for $250 million – the most expensive home on the market at the time. But, after failing to find a buyer, the price since come crashing down to $195 million.
Other price cuts in NYC’s luxury real estate market include:
An 8,000-square-foot unit at 432 Park Ave was recently purchased for $70 million, down from $135 million.
432 Park’s Penthouse was reduced to $130 million after being listed at $169 million two years ago.
An apartment in One57 went into contract at $34 million, down from $45 million in 2022.
However, real estate experts have stated that this widespread reduction in prices isn’t really a crash. Instead, it’s the market returning to normal levels after the pandemic-era boom.
Two Losers and a Winner in NYC Real Estate
New York’s real estate market has taken some dramatic turns over the past year that have left few people in the industry unscathed. But, some parties have been impacted more than others.
The Real Deal recently highlighted two losers and one winner in the city’s current residential real estate market.¹
1. Loser: Co-Ops - Many buyers already strayed away from co-ops due to their antiquated rules and the additional requirements required by co-op boards. But, now that mortgage rates have surged, low-income shoppers have been priced out of co-ops’ debt-to-income and post-close liquidity requirements.
2. Loser: New Development - Many developers have been slow-playing the release of new projects as they wait for economic conditions to improve. But, many will likely be forced by their loan terms to list during the Fall.
3. Winner: Brooklyn - Brooklyn has been emerging as one of the city’s most sought-after markets. This trend was supercharged during the pandemic, as buyers sought to avoid high-rise elevators, subways, and crowded streets. Experts expect this trend to continue.
Two Factors Are Reviving NYC Hotels
In August, the average rate for a hotel reached $260, according to data from CoStar.¹ This was roughly 17% more than 2019 levels and the highest rate for the month of August since 2008.
New York City hoteliers can attribute this sudden surge in hotel prices to two main reasons:
1. Rising tourism: The popularity of remote work might mean that fewer people are commuting to the financial district. But, that doesn’t mean that fewer people are visiting Times Square. NYC is expected to welcome 63.3 million tourists this year, well above 2019 levels.
2. Airbnb ban: New York City just launched a new law that will require short-term rentals to meet strict criteria in order to register with the city. This new law will effectively ban all Airbnb rentals. As Airbnbs vanish from the city skyline, hotels will absorb the stranded travelers. As such, hotel revenue could rise by as much as $380 million in 2024.
Looking forward: Hotel rooms will likely remain pricey in New York City, mainly thanks to the city’s restrictions on new hotel development which help keep supply limited.
Employers in New York must now provide a “good faith” salary estimate on all job listings. This is the result of a new pay transparency law that was recently passed.
A pre-war high-rise new Grand Central Station has sold for $26 million. The 19-story commercial building was purchased by the Sioni Group.
Roam is a new startup that uses assumable loans to help make buying a home more affordable. This startup lets sellers transfer their mortgage to a buyer so that the buyer does not have to get a new loan at today’s sky-high rate.
The average 30-year fixed-rate mortgage currently sits at 7.76%. This is the highest that mortgages have been in over two decades.
New housing starts have dropped to a three-year low. However, a jump in permits suggests that new construction remained supported by a dearth of homes on the market.
Have a question about buying or selling real estate in NYC? Please feel free to call me at 646.939.7375.
Corey Cohen Founder
The Roebling Group