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 sky high across the city—and, not just in downtown Manhattan. Of course, it’s always been expensive to live in New York. But the expense rarely deters interest or demand. And, with an economy growing stronger each year, the desire for housing—and, the cost of buying—has grown, too.
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 2019
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 2019 despite concerns that rising home prices mean another bubble is on the horizon.
The picture being painted in New York for the coming year, however, looks a bit more mixed. By mid-2017, some news outlets were reporting that the city was significantly undervalued despite rising median home sales prices. But, when 2018 came along it brought rental contingencies and steep discounts on selling prices in some areas, like Manhattan, with it. The luxury market, in particular, suffered and seems to be right on course for a steep correction. As a result, many news outlets now refer to New York as a buyer’s market. And, some have even said the city is in the midst of a downturn.
When you look outside Manhattan, however, you see that areas that continue to thrive. As usual, when it comes to analyzing the real estate market, it depends where you cast your eyes—and, wallet. And, in 2019, you’ll find more investment opportunities turning up in specific boroughs and in individual neighborhoods within each of those boroughs. Of course, 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.
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 numerous companies on the Fortune 500 list are headquartered here. Additionally, more than 71,000 jobs were added in the last year alone and the unemployment rate dropped again—to 4%. 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 2019. Many of these areas, especially when you break it down to the neighborhood level, are relatively affordable for homebuyers even as prices city-wide have gone up. And, for the neighborhoods still 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 the 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.
New York City is constantly in motion; people regularly move out and continually 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 has experienced a net gain in population since the last census, with Brooklyn leading the charge at 5.8%.
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, Millennials top the list. Gen Xers are the next largest segment of homebuyers. And, with the crash ten years behind us, we can expect to see 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 and their parents, the Silent Generation. Historically, these groups 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 older homeowners 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.
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, the L Train will shut down for repairs between Brooklyn and Manhattan in late April and construction is 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 as home prices fall and hold until the train line is complete.
Further, the expanded fleet of ferries by the NYC Ferry Service has been a bigger success with commuters than the city anticipated now that all six routes are operational. The degree to which this could affect the housing market long-term will likely vary from neighborhood to neighborhood. But, construction has sprung up along each stop as its been added to the line and, in general, communities 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.
Changes to the federal tax code went into full effect last year and, once the shock lifts, could shift whether or not people are able and willing to continue maintaining a property in New York in 2019. With property tax deductions now capped at $10,000 and mortgage interest deductions limited for properties valued at $750,000 and under, the number of homeowners willing to hang on may dwindle. New York City already has high property taxes as it is, making a maximum possible deduction of $10k a mere drop in the bucket—and, 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 areas and into up-and-coming neighborhoods where home prices, and tax burdens, are easier to manage. These neighborhoods will hold the best potential returns for real estate investors this year.
Additionally, mortgage interest rates have finally been going up and will continue their rise well into 2019. Currently more than 5%, the impact over the last year has been enough to raise payments of principal and interest higher than what some people can afford. And, five more hikes are slated for this year. 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 2019
Overall, because demand for housing in New York rarely seems to waiver, 2019 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. Foreclosure activity within the five boroughs has been in flux in recent years. Though filings declined again in 2018, some New York City neighborhoods still have the highest number of foreclosures in the country. 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 Concourse and Bedford Park are experiencing a renaissance, as are the Queens communities of Corona and Auburndale. 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 decent returns on investment properties from any of these neighborhoods in 2019 is a good 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 you have access to some of the best tools and branding on the block. That could make for a great 2019.
The future of investing in New York real estate still holds promise. Contact HomeVestors today to discuss how to make your future as a real estate investor look more promising too.
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