NYC real estate predictions for 2023

On Behalf of | Dec 4, 2022 | Residential & commercial real estate transactions |

The real estate market in New York and elsewhere has been a critical reason for the Federal Reserve to raise its interest rates four times in 2022, going from 3% in some cases to as high as 7%. This rise led to a price decline, particularly as we noted in a previous post with coops and condos. More interest increases in 2023 to combat inflation are also likely. There are no guarantees in forecasting the future, but some local experts are making other predictions based on year-end observations.

The market will stay slow

Besides the interest increase, the other story in 2022 was the lack of housing stock. Unfortunately, this is unlikely to change, with homeowners less inclined to move and give up their low mortgage rate in favor of one that likely will be considerably higher. New buyers also suffer the effects of surging inflation and mortgage rates, finding themselves priced out of the market or even losing previously approved eligibility. Not surprisingly, there was an increase in the number of transactions that did not close. According to Housing Affordability Index, New York City dropped 25.6% quarter-on-quarter growth (increases mean more affordability). All these factors mean people are not buying and not selling.

What will happen to prices in 2023?

It is still too early to give final tallies for 2022, but property in the city remains one of the country’s best long-term real estate investments – prices doubled in the last decade with an annual appreciation rate of nearly 6%. However, Zillow predicts a small decline in all home values locally and 5% nationally by the third quarter of 2023 over the same time in 2022. That said, the average price of New York City homes will likely remain just under $1 million.

Some good news for buyers

It is worth noting that properties are staying on the market longer at the end of 2022 than in recent years. This trend will likely continue and may prompt impatient sellers to lower their prices to move the property. Bidding wars of the past will also become less prevalent as the market resets.