While peering through an imaginary crystal ball, real estate industry leaders predict cloudy skies for the early 2023 residential market. In a recent webinar hosted by the Hudson Gateway Association of Realtors in the Greater New York, a National Association of Realtors (NAR) economist, along with a panel of expert brokers, weighed in on the state of the market for the next six months.
Nadia Evangelou, NAR’s senior economist and forecasting director, said inflation is one of the main triggers for what’s happening in the housing market. “In August, for example, inflation rose much faster than expected, reaching 8.3%,” she noted. “Combined with higher mortgage rates, rising costs for gas, groceries and other goods are now forcing some people out of the market.”
Using the New York City subway real estate market as an example, Evangelou said the average monthly mortgage payment in September 2021 was $2,100, compared to the average September 2022 payment of $3,360 per month. “It’s almost $1,300 more every month,” she said. “Mortgage rates are significantly higher than in previous years, and that’s definitely hurting homebuyers, many of whom are paying up to 60% more.” The NAR estimates that more than 1.4 million New York City subway households have been shut out of the market this year.
Currently, rates are above 6% and Evangelou predicts that they will remain in this range until the end of 2022. “Although there has been a decline in home sales, I think prices will continue to rise. increase, but at a slower pace,” she said, explaining that housing inventory is still falling short nationally.
In terms of affordability, the outlook is still bleak for the near term future. “Households need to earn about $200,000 a year to be able to afford half of the enrollment in the New York metro area,” she revealed.
While 2021 was the best year in the housing market across the country, this year home sales have continued to decline for the past seven months. “We are certainly seeing a slowdown in sales, but not in prices,” Evangelou explained. “Our data shows home prices rose 7.7% nationally for the second month in a row. Due to the severe housing shortage across the country, prices will tend to remain stable as there is no there is not enough supply.
Joseph Rand, panelist and chief creative officer at Howard Hanna/Rand Realty in Nanuet, New York, agreed. “We hit a record high in 2021, but you can’t really compare this year to 2020 and 2021 when sales exploded,” he said. “I think we need to compare current sales to markets in 2019 or 2018, and in this case home sales are up in most areas of the Hudson Valley.”
Rand was hesitant to use the word “recession,” however. “I don’t think we’re going to see anything like what we saw in 2008,” he added. Fellow panelist Jonathan Miller, president and CEO of Miller, Samuel Inc., Manhattan real estate appraisers and consultants, agrees.
“There’s really no way to accurately predict whether a recession is coming — it all depends on how long the Fed keeps raising rates,” he explained. “Obviously the momentum has been taken out of the mortgage sector due to the doubling of rates, but that, in turn, is pushing people into the rental market.”
Shifts in the New York Metro Area
Yet in the United States, the number of households has increased by 7% over the past year, according to recent data from the NAR. However, some major metropolitan areas like New York lag behind, at just 6%. In New York, Queens and Kings counties recorded the fastest growth in the past decade, at 8.5%, and New York County (Manhattan), at 8.3%.
Conversely, compared to the rest of the country, the New York metropolitan area has the fifth largest annual population decline. Nationally, the NAR found that 47% of the moving population arrived in urban areas, but 53% migrated to suburban or rural areas. “It has a lot to do with the shift to remote working, which is five times bigger than in 2019,” Evangelou added. “Those moving to the suburbs are also looking for bigger homes.” In 2019, the average single-family home was 1,580 square feet, but in 2022 the national average is 1,900 square feet.
Currently, there are some 3.47 million renters in the New York metropolitan area alone, and millions more across the country. While married households may do better on two incomes, NAR statistics indicate that only one in three renters are married. “With high rents, it becomes difficult for single people to save money to eventually buy a house,” she noted.
Panelist Gabe Pasquale, vice president of New Development, Christie’s International, NY Metro, thinks the answer may lie in the development of single-family rental communities. “We haven’t seen a lot of this in the northeast, but it seems to be growing in other parts of the country,” he said. “It will give younger people a new opportunity to have a single-family home. Many millennials are now looking to change their urban lifestyle without being locked into buying something. »
In White Plains, New York, where average rents range from $1,800 to $2,200 for a bedroom, Pasquale said the situation doesn’t give people much incentive. “If they keep renting at these prices, they won’t be able to save,” he added.
Miller admitted that if some rents stabilize, he doesn’t expect them to fall. “It’s hard to imagine rents dropping to more affordable levels, especially when the rental market is already very tight,” he said. “I think the single-family rental market and the new lease-to-own offerings will be big drivers of growth.”
Chintan Trivedi, panelist and real estate broker at RE/MAX In The City in the Bronx, also thinks the rental market will remain robust. “I think millennials are sitting on the sidelines and not wanting to commit to a 30-year mortgage at this point,” he said.
Owners don’t want to sell
On the sell side, Rand’s concern is with sellers who may not have the means to sell. “You’re usually going to spend more money when you’re looking to upgrade your home, but now, factoring in the interest charges, many sellers have such good rates they don’t want to give up their current home,” he said. he declared. “I think we need to find more creative ways for today’s sellers to sell.”
As for the future, Rand warns sellers and buyers against panicking. “We’re not going to look back to 2008 when people who didn’t have a business to buy a house could get a loan. We have no bad debts or foreclosure boom today, and prices are still up 30% from two years ago,” he said.
Miller echoed Rand’s sentiments. “Lenders aren’t losing their minds and mortgage underwriting terms are much more conservative now,” he added. While Pasquale thinks the fourth quarter of 2022 may not be great, he said the fact that there is still a housing shortage will help stabilize prices. “The fourth quarter is likely to be the softest of 2022,” Trevidi added, “but I also think inventory will rise by the spring of next year.”
“At the end of the day, buyers can’t bid 20% lower than ask and expect to get it, but sellers shouldn’t reject a decent offer,” Rand noted.
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Mary T. Prenon covers real estate and business. She has been a writer and journalist for over 25 years for various print and broadcast media in New York.