The Ultimate New York Housing Market Forecast for 2018: Where Should You Invest?

Life in New York moves pretty fast. Some might say the same is true of the city’s recovery from the housing market crash of 2008. Home prices are up and keep rising–and not just in downtown Manhattan. Of course, it’s always been expensive to live in New York. But the expense doesn’t always deter interest or demand and, with an economy on the rebound, the desire for housing–and the cost of buying–has grown.

That doesn’t mean, however, that there aren’t any good buys left, for investors. There are still some real estate investment opportunities in NYC, particularly within several of the city’s boroughs, that have the potential to produce good returns and attract would-be homeowners. In order to choose those opportunities wisely, let’s take a look at the housing market forecast for New York and the factors that could shape where you invest in the coming year.

Forecasting the Housing Market in New York for 2018

On a national scale, the U.S.housing market is faring well and has been for years since it crashed almost a decade ago. Median home sales prices have gone up, inventory has dropped, and new development has been springing up in most major metropolitan cities and their suburban counterparts. Of course, not every region’s market has rebounded at the same clip–or even back to pre-crash levels. But the nation’s recovery, overall, is palpable as more and more people put their buying fears aside to purchase new homes. And, this trend is expected to continue through 2018 despite concerns that rising home prices mean another bubble is on the horizon.

In fact, there are many real estate markets across the nation that are still considered undervalued, including our already-expensive city. As recently as mid-2017, data provided exclusively to Forbes suggested that real estate in the New York metropolitan region was undervalued by more than 10%. While home prices are up, so is nominal income and population, according to the Forbes report. Even though the housing market in the Big Apple is thriving again, especially in high-demand areas like Manhattan, there appears to be room for even more growth.

That said, real estate market growth will be uneven across the metro area with more investment opportunities turning up in specific boroughs and in individual neighborhoods within each of those boroughs. There are a number of factors that could potentially impact this growth in the coming year–and where you decide to invest in the nation’s fastest moving and ever-changing city. Here are a few.

Location.

New York continues to attract some of the most educated, talented, and wealthiest people from all over the world. In addition to the New York Stock Exchange (NYSE), our city is home to several prestigious schools, hospitals, and corporations. Three of its hospitals are ranked as among the best in the nation and 54 companies on the Fortune 500 list are headquartered here. Additionally, more than 65,000 jobs were added in the last year alone and the unemployment rate has dropped to 4.3%. So, the widespread appeal for students, industry professionals, entrepreneurs, and job seekers remains strong for those seeking more, and potentially better-paying, career opportunities.

But it’s specifically in the boroughs of Brooklyn, Queens, and the Bronx–and even within some Manhattan neighborhoods–that you will find friendly opportunities to invest in 2018. Many of these areas, especially when you break it down to the neighborhood level, are still affordable for homebuyers even as prices have gone up. And for the neighborhoods in transition, like Mott Haven in South Bronx and Manhattan’s East Harlem, the interest of homebuyers is expected to increase as property values rise in step with the addition of new restaurants, pubs, shops, and jobs. The various revitalization programs passed by the mayor in the last several years have helped initiate these changes in up-and-coming areas. Thanks to these programs, funds get distributed through a variety of channels, like residential and commercial development, job creation, and the restoration of parks and community centers. These elements provide incentives for businesses to move in and make the neighborhoods generally more attractive. So getting fixer-uppers to buy and renovate in the areas on the brink of stardom gives you a good chance of realizing a nice return when you sell.

Population.

People have always moved out of New York and people will always move in. The cost of living in the city, including the expense of buying and maintaining a home, is the most common reason many families leave. But a prospering economy, including the addition of new jobs, is an equally compelling reason families come–and come they have. In fact, each of the five boroughs have experienced a net gain in population, with the Bronx leading the charge at 5.1%.

Even with a citywide increase in population, however, certain groups are buying homes more than others. Of those moving in and purchasing property throughout New York, immigrants top the list along with Millennials. Gen Xers are the next largest segment of homebuyers. And, with the crash almost ten years behind us, we can expect to see more and more bankruptcy and foreclosure survivors entering the market as well. So it’s important to keep these individual buying populations in mind when it comes time to market and sell your New York residential investment property.

The only group not showing a strong interest in buying homes are the Baby Boomers. Historically, this group sold the big family home when the kids moved out, downsizing to something smaller and less expensive. But, now they’re reluctant to do so and it could be because it no longer makes good financial sense. Whatever the reason, many Baby Boomers are staying put for now. This could put a squeeze on the availability of some of the older, distressed homes for sale that are owned by this population.

Buying real estate where there’s still a high concentration of available distressed inventory and a strong interest from one of the larger segments of homebuyers will be a good strategy this year.

Transportation.

A common thread connecting most of the nation’s up and coming neighborhoods is the addition, or improvement, of public transportation. New York got its first underground subway line in 1904–three decades after getting its first elevated line. Since then, the city’s public transportation system has grown to serve several million passengers every day and those numbers are not expected to slow down anytime soon. However, it is an old and decrepit system–one in need of a lot of repairs and, in some areas, a big overhaul. Thankfully, some improvements and expansions are underway.

Though the long-term effect of these improvements is sure to be positive, especially for homebuyers, in the short run we might see an adverse impact on home and rent prices. For example, plans to shut down the L Train for repairs between Brooklyn and Manhattan have already been approved. Though construction doesn’t start until 2019, it’s expected to last for over a year. In response, rents in the neighborhoods along the line have already started to drop. One way to use this to your advantage is to buy now while home prices are down and hold until the train line is complete.

Further, the expanded fleet of ferries along the East River, coupled with recently lowered fares, has been a bigger success with commuters than the city anticipated. It’s too early to tell to what degree this could affect the housing market, but neighborhoods near any transportation corridor tend to experience a rise in popularity, as well as a jump in home and rent prices. As a good rule of thumb, if you can find NYC fixer-uppers in these and other high-commuter neighborhoods, chances are you’ll have a great investment property on your hands.

Taxes.

Recent changes to the federal tax code will certainly affect whether or not people are able and willing to buy or maintain a property in New York in 2018. Property tax deductions have been capped at $10,000 and mortgage interest deductions are now limited for properties valued at $750,000 and under. New York City has high property taxes as it is, making a maximum possible deduction of $10k a mere drop in the bucket–not enough to ease the cost of homeownership for some families. And, because many buyers purchase properties under the $750k price range, the new limits on interest deductions will hurt them more than those who can afford higher-priced homes and higher taxes. This could push people out of more expensive neighborhoods and into up-and-coming areas where home prices, and tax burdens, are easier to manage. These neighborhoods will hold the best potential returns for real estate investors this year.

Interest Rates.

Additionally, mortgage interest rates are finally going up and are expected to continue their slow creep well into 2018. Though the target adjustment range is only between 1.25 – 1.5%, the impact could be enough to raise payments of principal and interest higher than what some people can afford. The good news for investors is that inventory may increase as people can no longer keep up with the cost of owning a home because of higher property taxes or interest rates or both, and decide to sell. As long as you have a strategy in place to find leads on distressed homeowners, you should find scooping up these unwanted properties relatively easy.

Investing in New York Real Estate in 2018

Overall, because demand for housing in New York rarely seems to waiver, 2018 looks like another good year for buying investment property in NYC. Though some factors have the potential to negatively impact inventory, like an aging population that wants to sit tight where they are, other factors–like the new tax laws–could have the opposite effect and encourage people to sell. Whether these factors cancel each other out and stabilize inventory levels remains to be seen, but it’s not likely. One -tenth of the mortgages in New York City are delinquent and, of those, more than half are in foreclosure. With so many homeowners in distress, it’s more likely that the opportunities to buy homes cheaply will increase.

Additionally, there are still several underdeveloped and undervalued neighborhoods in New York that are attracting buyers who’ve been priced out elsewhere. The Bronx neighborhoods of Highbridge, Morris Heights, and Fieldston are experiencing a renaissance, as are the Queens neighborhoods of Douglaston and Little Neck. With falling crime rates and improving school systems, these and many other areas of New York are considered up-and-coming. And, the growing population of homebuyers is taking notice. So the chance of seeing good returns on investment properties from any of these neighborhoods in 2018 is a real possibility.

But where you invest in real estate is not just about location, nor is it entirely dependent on the factors that could tip the housing market in one direction or another. Ultimately, where you invest should be determined by the strength of your leads.

Lead Generation Tools for Predicting Potential Returns

As an independently owned and operated HomeVestors® franchisee, great leads from some of New York City’s best up-and-coming neighborhoods can come to you–all thanks to your access to HomeVestors’ innovative marketing tools and nationally-recognized “We Buy Ugly Houses®” brand. So, when a homeowner is unable to pay the mortgage or the property taxes, they know who to call to sell their property quickly. With a HomeVestors franchise, you have the potential to grow your real estate investing business no matter the forecast because, when you have access to some of the best tools and branding on the block. That could make for a great 2018.

The future of investing in New York real estate looks promising. Contact HomeVestors today to discuss how to make your future as a real estate investor look more promising too.

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