let’s talk : the GREATER NEW YORK CITY AREA
Good morning!
Today, I decided to go a bit rogue, compared to what we have been talking about over the past few weeks, and do a MARKET DEEP DIVE. While many of the readers on here are based in the northeast, specifically New York City, I thought it may be fun to talk about just that!
So, as we do, let’s talk real estate, let’s talk the GREATER NEW YORK CITY AREA…
Recently, there has been much debate over whether or not the NYC region has hit it’s real estate peak. Many will argue that the NY bubble is on the verge of bursting. I think that’s a totally valid assessment as…(1) PRICES are ASTRONOMICAL: I’m literally forced to pay more for my tiny one bedroom apartment in midtown than a four bedroom home just an hour away – it is absurd and my bank account hates me for it. The prices are CRAZY, but yet that’s not stopping developers at all… which leads me to (2) NEW DEVELOPMENTS: Everywhere you look around here there seems to be a new development going up. High property taxes, land and labor costs force many real estate developers to build higher-end properties in order for their numbers to work. (3) VACANCY: NYC vacancy rates are up 44% since 2008 (re U.S. Census Bureau). (4) POPULATION: Recent studies have shown that more people are leaving the New York City area than coming in, BUT this statistic only tracks the movement of U.S. residents, and does not account for anyone moving in from foreign countries- so is this actually true? IDK…what I do know is that these facts alone led me to believe that the tri-state area is in fact facing a bubble.
BUT, then just a few weeks ago I went to a speaker series in which we discussed whether or not this was true. While I am no genie, or physic, or even expert for that matter, and cannot tell you what will happen, I can tell you what I learned from this guy, and I truly think he has a point!
He explained it as such…
The New York metropolitan area can be broken up into two market segments:
(1) $2MM+ market
(2) <$2MM market
Much of the tri-state area real estate falls within the $2MM+ bucket, HOWEVER much of the population does not. According to the U.S. Census Bureau, there are significantly more available “expensive” apartments ($2,500+ in monthly rent), than “affordable” apartments in NYC. Pre-housing crash, on average, people moved every 7 years, whereas today we are on a 12 year cycle. This means people are selling their homes less often now, which leads to a shortage of homes for new buyers. We heard from real estate agents from suburbs on both the NJ and NY sides, who noted that homes <$1MM were flying off the shelves. We have way more <$2MM buyers than properties to buy, AND, to their assessment, we can expect many more <$2MM buyers to make their way to this area. WHY? Well because its New York City and its magical, but also the movement of TECH JOBS (in addition to the ever bustling job market already here). Tech companies are slowly starting to trickle out of Silicon Valley, and make the move east. Companies like GOOGLE and AMAZON are investing beaucoup bucks into New York City. WHY are these companies moving to New York? ACCESS. New York City gives them access to everything; venture capitalists, partners and even simple things that their employees value such as accessibility to doctor’s offices, restaurants, schools, stores so that their employees can run out and get something done in the middle of the day without missing hours of work stuck in a CA traffic nightmare. We have everything at our finger tips in this city and people value that. The final takeaway of this assessment was that while we may see a value hit to the $2MM+ properties in the near future, the <$2MM market can expect to thrive as we combat the lack of supply.
NOW, based on the above, the Google & Amazon investments alone could lead me to believe we should try and scoop up any real estate up here that we can. In my case, Manhattan investments are OUT, the capital requirements alone are enough to knock most players out of the game. BUT that doesn’t mean we can’t invest in the greater area if we want to. Any towns with homes under that <$2mm threshold along NJ transit, Metro North or the Long Island Railroad lines could potentially be a real money maker for us all.
Regardless, of whether or not New Yorkers are up against a bubble at the moment, I think it is safe to say that NYC will always be a hot market. The neighborhoods, museums, the job market, the culture and charm will always attract people here.
SO, the question here really is timing… do we invest now OR wait for a bust and swoop in then – what are YOUR thoughts?
Feel free to comment on the post here (https://lets-talk-re.com/blog/) and let us know what you think!
Happy Wednesday!
Erin
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Thanks, Erin! Nice article! The luxury market seems to definitely be where ahe potential oversupply will be here, but I’m curious how any price major price declines in the $2mm+ market may trickle down to impact the <$2mm market. For example, if a luxury price hit forced a certain number of homes below $2mm, there’s additional (theoretically more luxurious) home supply falling into the lower cohort that can then push the “less luxurious” home price down a bit. Would love to hear your thoughts!
That’s a GREAT question & now I am super curious myself! Next week’s topic?! “LUXURY MARKET: is it truly declining? & How might this impact the rest of the real estate market?”