2021: The End of The Golden Age?

The 2021 New York City real estate market was the busiest in the entire recorded history of the industry. It was busier than the co-op craze of the early 1980s, with more transactions than the sellers' market just before the Great Recession, and even more active than 2015-2016, when we saw the highest recorded price per square foot. In fact, it was busier than any year since REBNY started keeping figures back in 1995, basically when the internet started :-).

While 2021 prices weren't driven to the extreme highs of 2015-2016, the year was all about transactions. More buyers bought more property in 2021 than in any year in the last two decades. Yet, it seems like we're on the precipice of that all changing. I'm hearing rumblings from other agents that "things are slowing down." But are we finally seeing the regular seasonal slowdown following typical historical trends, or is this something bigger? The stock market has dropped nearly 20 points since the beginning of 2022. Interest rates for conforming loans are scraping the bottom of 6 percent at the time of this writing, and inventory in New York City is finally starting to increase after 18 months of declines. So the question remains: Are we at the end of real estate's golden age?

It's tough to say and even tougher to predict the future nowadays. Several significant economic and geopolitical situations need to unfold for us to know exactly where the real estate market is headed. As we wrap up the 2022 spring market, I can tell you it was extremely busy. Not as busy as Spring 2021, but still record-breaking, fruitful and competitive for most brokers, buyers and sellers. But if we look at our local real estate indicators, we see inventory starting to increase, weekly signed contracts decreasing, and interest rates on the rise. This usually indicates a pullback by buyers in the sales market and possibly a lateral move into the rental market. If so, prices should decrease if inventory rises and buyer participation shrinks.

All we know is that we'll know more in the coming months. Even then, more questions will always arise. As we move into the summer, a historically much slower time, we'll better understand buyer interest in purchasing New York City real estate. However, another consideration is unique to New York City real estate: the rental market. If monthly rents get too high and surpass mortgage plus maintenance/common charge costs, then potential buyers trickle away from the rental market and pursue the sales market. And even with minor adjustments to sale prices, if 1 to 5 percent of buyers jump back into the market pretty quickly and absorb the inventory at a rapid pace, it could increase sales prices ever so slightly. So as this pendulum of buyers goes back and forth chasing interest rates versus rental pricing – the market gets even harder to predict. So don't!

My advice is to stay in the moment. Rent if you can afford it and like the property. Buy if it's right for you, and list (and really just let it go) if you're ready to sell your home. It's time for us to complete the 2021 Golden Age and move on to the next chapters of the New York City real estate market story. It'll find its direction. Buyers will buy, and sellers will sell. It's just not going to bea a 2021 type of market any longer.