Every year, StreetEasy predicts trends that will be driving the New York City real estate market in the coming year. A year ago, we predicted that 2016 would be the year of the luxury market slowdown and slower price growth across the board, fierce competition in Upper Manhattan and a greater rent burden for Brooklynites.
Heading into the New Year, we dusted off our crystal ball – that is, our extensive market data – to forecast some of the leading trends that will shape the city’s sales and rental markets in 2017.
Manhattan Sales Market Will Have Slowest Growth of All Boroughs
Where high demand and high-priced inventory kept Manhattan resale prices soaring over the past few years, luxury is now what’s dragging the market back down to earth. Manhattan’s luxury tier was the first segment of the market to see actual price declines in November 2015, a trend that has continued for 11 consecutive months. We expect this trend to spread to all segments of the market, making 2017 one of the slowest years of price growth for Manhattan sales in years.
The median resale price in Manhattan is forecasted to increase only 0.6 percent to $985,585 by November 2017, the slowest pace of growth across all boroughs[i]. The Bronx is the only borough where resale prices are expected to decline, falling 1.4 percent over the next 12 months.
Krishna Rao, StreetEasy economist says, “The oversaturation of luxury inventory in Manhattan left the high-end buyers and sellers with a hangover. The next year will show the market recalibrating after this luxury inventory overload, which could be good news for buyers who can afford to live in Manhattan. We will see even more price cuts in the borough as sellers adjust to the new state of the market.”
See chart below for median resale price and median rent forecasts for each borough.
As Rents Rise, More Will Turn to Homeownership in 2017
Renters in New York City will not find relief in 2017. Rents are expected to continue rising across all boroughs, albeit at a slower pace, and will continue to far outpace income growth in the coming year.
Queens rents increased 4.1 percent year-over-year to $2,870 this past November, outpacing both Manhattan and Brooklyn. They are expected to continue increasing by 2.4 percent over the next 12 months, followed by Manhattan (2 percent) and Brooklyn (1 percent).
As rents rise and sales price growth slows, 2017 will be the year that many renters who have saved for a down payment become homeowners. In the Bronx, the tipping point decreased by 10 percent to 1.7 years in November of this year, meaning it would take less than two years for the costs of buying to be less than renting. The tipping point decreased by 4.1 percent to 4.2 years in New York City overall.[ii] Over 80 percent of all StreetEasy neighborhoods with recorded tipping points had a tipping point of less than five years as of November 2016.
“The minimum wage is increasing and incomes are inching upwards, but it’s an uphill battle when rents are already so high across the city. For those who have saved for a down payment, we expect to see more people – especially millennials – taking advantage of a slowing sales market and buying homes as rents continue to rise,” says Rao.
“Especially for those who plan to live in an apartment for more than a few years, the investment could pay off sooner than it has in the past. The majority of neighborhoods had a tipping point of less than five years in November – that’s half the time it takes to become a ‘real New Yorker’ as the expression goes.”
Transportation – or Lack Thereof – Will Transform Neighborhoods
Transportation will rule real estate conversation in 2017. Between the long-awaited opening of the Second Avenue Subway, 7-train extension to Hudson Yards, impending L-train shutdown and M-train repairs, there are a lot of major public transportation changes happening in NYC in the near future. Transportation plays an integral role in transforming a neighborhood, especially its real estate market, and research shows that rent and sales prices can increase substantially based on a home’s proximity to convenient transportation.
Neighborhoods impacted both positively and negatively by these upcoming changes will be under the magnifying glass in 2017. We expect there to be an influx of interest in these markets as renters, buyers and sellers evaluate how their ability to get around the city quickly will be affected.
“In a bustling city like New York where everyone depends on public transportation, time is money,” says Rao. “Though some buyers and renters may seize the opportunity to negotiate in formerly hot areas like Williamsburg, others will be willing to pay a premium for a quicker commute and to avoid any pause in transit service. Expect heightened competition in previously less accessible areas of Manhattan, as neighborhoods such as Yorkville and Hudson Yards enter the spotlight.”
Kingsbridge Tops List of Hottest Neighborhoods in 2017; Brooklyn Dominates the Rest
StreetEasy’s annual list of the city’s hottest neighborhoods is a reflection of where New York apartment shoppers are expected to turn their attention in the coming year. Kingsbridge in the Bronx topped the 2017 list, according to the StreetEasy Hot Market Index, which ranks all of the city’s neighborhoods using a series of key performance indicators.[iii]
While the Bronx took first place, Brooklyn neighborhoods occupy six of the 10 spots. Manhattan and Queens were less present in the 2017 list, with only Yorkville in Manhattan and Queen’s Astoria and Bayside neighborhoods fitting the ‘hot neighborhood’ bill in the coming year.
“This year’s list is all about the trade-offs New Yorkers are willing to make, whether that means extending your search by one neighborhood in exchange for a nearby park, or extending your commute to find a single-family home,” says Rao.
“Kingsbridge has long been overshadowed by Riverdale in the Bronx, but with new city funding allocated to expand an already robust shopping district and initiate neighborhood clean-up, this is an area that’s primed for growth and people are taking notice. The Brooklyn neighborhoods that dominate the list suggest that residents are eschewing more traditionally popular areas in favor of those that offer similar waterfront views or park adjacency for a lower price tag.”
[i] Median resale price is forecast using the StreetEasy Price Forecast, a 12-month projection of resale prices derived from the StreetEasy Price Index. Full methodology for the StreetEasy Price Forecast can be found here.
[ii] The StreetEasy Tipping Point approximates the number of years it would take for the costs of owning a home to equal the costs of renting a comparable one in the same area. Full methodology can be found here.
[iii] We identified the hottest neighborhoods of 2016 using the StreetEasy Hot Market Index, which takes into account four key performance indicators: Annual change in sales price, annual change in rent price, recent population growth and annual change in StreetEasy page views per listing. Population growth is derived from 2011 and 2014 Census ACS data.
[iv] Numbers listed in chart reflect Jan. 1, 2016 – Oct. 31, 2016 median asking price and median asking rent.